THE COMPANIES ACT, 2013 
__________________ 

ARRANGEMENT OF SECTIONS 

Last update-29-7-2022 
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CHAPTER I 
PRELIMINARY 

SECTIONS 

1.  Short title, extent, commencement and application. 
2.  Definitions. 

CHAPTER II 
INCORPORATION OF COMPANY AND MATTERS INCIDENTAL THERETO 

3.  Formation of company. 
3A. Members severally liable in certain cases. 
4.  Memorandum. 
5.  Articles. 
6.  Act to override memorandum, articles, etc. 
7.  Incorporation of company. 
8.  Formation of companies with charitable objects, etc. 
9.  Effect of registration. 
10.  Effect of memorandum and articles. 
10A. Commencement of business, etc. 
11.  [Omitted.]. 
12.  Registered office of company. 
13.  Alteration of memorandum. 
14.  Alteration of articles. 
15.  Alteration of memorandum or articles to be noted in every copy. 
16.  Rectification of name of company. 
17.  Copies of memorandum, articles, etc., to be given to members. 
18.  Conversion of companies already registered. 
19.  Subsidiary company not to hold shares in its holding company. 
20.  Service of documents. 
21.  Authentication of documents, proceedings and contracts. 
22.  Execution of bills of exchange, etc. 

CHAPTER III 
PROSPECTUS AND ALLOTMENT OF SECURITIES 
PART I.—Public offer 

23.  Public offer and private placement. 
24.  Power of Securities and Exchange Board to regulate issue and transfer of securities, etc. 
25.  Document containing offer of securities for sale to be deemed prospectus. 
26.  Matters to be stated in prospectus. 
27.  Variation in terms of contract or objects in prospectus. 
28.  Offer of sale of shares by certain members of company. 
29.  Public offer of securities to be in dematerialised form. 
30.  Advertisement of prospectus. 
31.  Shelf prospectus. 
32.  Red herring prospectus. 
33.  Issue of application forms for securities. 
34.  Criminal liability for mis-statements in prospectus. 
35.  Civil liability for mis-statements in prospectus. 

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36.  Punishment for fraudulently inducing persons to invest money. 
37.  Action by affected persons. 
38.  Punishment for personation for acquisition, etc., of securities. 
39.  Allotment of securities by company. 
40.  Securities to be dealt with in stock exchanges. 
41.  Global depository receipt. 

42.  Issue of shares on private placement basis. 

PART II.—Private placement 

CHAPTER IV 

SHARE CAPITAL AND DEBENTURES 

43.  Kinds of share capital. 
44.  Nature of shares or debentures. 
45.  Numbering of shares. 
46.  Certificate of shares. 
47.  Voting rights. 
48.  Variation of shareholders’ rights. 
49.  Calls on shares of same class to be made on uniform basis. 
50.  Company to accept unpaid share capital, although not called up. 
51.  Payment of dividend in proportion to amount paid-up. 
52.  Application of premiums received on issue of shares. 
53.  Prohibition on issue of shares at discount. 
54.  Issues of sweat equity shares. 
55.  Issue and redemption of preference shares. 
56.  Transfer and transmission of securities. 
57.  Punishment for personation of shareholder. 
58.  Refusal of registration and appeal against refusal. 
59.  Rectification of register of members. 
60.  Publication of authorised, subscribed and paid-up capital. 
61.  Power of limited company to alter its share capital. 
62.  Further issue of share capital. 
63.  Issue of bonus shares. 
64.  Notice to be given to Registrar for alteration of share capital. 
65.  Unlimited company to provide for reserve share capital on conversion into limited company. 
66.  Reduction of share capital. 
67.  Restrictions on purchase by company or giving of loans by it for purchase of its shares. 
68.  Power of company to purchase its own securities. 
69.  Transfer of certain sums to capital redemption reserve account. 
70.  Prohibition for buy-back in certain circumstances. 
71.  Debentures. 
72.  Power to nominate. 

CHAPTERV 

ACCEPTANCE OF DEPOSITS BY COMPANIES 

73.  Prohibition on acceptance of deposits from public. 
74.  Repayment of deposits, etc., accepted before commencement of this Act. 
75.  Damages for fraud. 

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SECTIONS 

76.  Acceptance of deposits from public by certain companies. 
76A. Punishment for contravention of section 73 or section 76. 

CHAPTER VI 
REGISTRATION OF CHARGES 

77.  Duty to register charges, etc. 
78.  Application for registration of charge. 
79.  Section 77 to apply in certain matters. 
80.  Date of notice of charge. 
81.  Register of charges to be kept by Registrar. 
82.  Company to report satisfaction of charge. 
83.  Power  of  Registrar  to  make  entries  of  satisfaction  and  release  in  absence  of  intimation  from 

company. 

84.  Intimation of appointment of receiver or manager. 
85.  Company’s register of charges. 
86.  Punishment for contravention. 
87.  Rectification by Central Government in Register of charges. 

CHAPTER VII 
MANAGEMENT AND ADMINISTRATION 

88.  Register of members, etc. 
89.  Declaration in respect of beneficial interest in any share. 
90.  Register of significant beneficial owners in a Company. 
91.  Power to close register of members or debenture holders or other security holders. 
92.  Annual return. 
93.  [Omitted.]. 
94.  Place of keeping and inspection of registers, returns, etc.  
95.  Registers, etc., to be evidence. 
96.  Annual general meeting. 
97.  Power of Tribunal to call annual general meeting. 
98.  Power of Tribunal to call meetings of members, etc. 
99.  Punishment for default in complying with provisions of sections 96 to 98. 
100. Calling of extraordinary general meeting. 
101. Notice of meeting. 
102. Statement to be annexed to notice. 
103. Quorum for meetings. 
104. Chairman of meetings. 
105. Proxies. 
106. Restriction on voting rights. 
107. Voting by show of hands. 
108. Voting through electronic means. 
109. Demand for poll. 
110. Postal ballot. 
111. Circulation of members’ resolution. 
112. Representation of President and Governors in meetings. 
113. Representation of corporations at meeting of companies and of creditors. 
114. Ordinary and special resolutions. 
115. Resolutions requiring special notice. 
116. Resolutions passed at adjourned meeting. 
117. Resolutions and agreements to be filed. 

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SECTIONS 

118. Minutes of proceedings of general meeting, meeting of Board of Directors and other meeting and 

resolutions passed by postal ballot. 

119. Inspection of minute-books of general meeting. 
120. Maintenance and inspection of documents in electronic form. 
121. Report on annual general meeting. 
122. Applicability of this Chapter to One Person Company. 

CHAPTER VIII 

DECLARATION AND PAYMENT OF DIVIDEND 

123. Declaration of dividend. 
124. Unpaid Dividend Account. 
125. Investor Education and Protection Fund. 
126. Right to dividend, rights shares and bonus shares to be held in abeyance pending registration of   

transfer of shares. 

127. Punishment for failure to distribute dividends. 

CHAPTER IX 

ACCOUNTS OF COMPANIES 

128. Books of account, etc., to be kept by company. 
129. Financial statement. 
129A. Periodical financial results. 
130. Re-opening of accounts on court’s or Tribunal’s orders. 
131. Voluntary revision of financial statements or Board’s report. 
132. Constitution of National Financial Reporting Authority. 
133. Central Government to prescribe accounting standards 
134. Financial statement, Board’s report, etc. 
135. Corporate Social Responsibility. 
136. Right of member to copies of audited financial statement. 
137. Copy of financial statement to be filed with Registrar. 
138. Internal Audit. 

CHAPTER X 

AUDIT AND AUDITORS 

139. Appointment of auditors. 
140. Removal, resignation of auditor and giving of special notice. 
141. Eligibility, qualifications and disqualifications of auditors. 
142. Remuneration of auditors. 
143. Powers and duties of auditors and auditing standards. 
144. Auditor not to render certain services. 
145. Auditor to sign audit reports, etc. 
146. Auditors to attend general meeting. 
147. Punishment for contravention. 
148. Central Government to specify audit of items of cost in respect of certain companies.  

CHAPTER XI 

APPOINTMENT AND QUALIFICATIONS OF DIRECTORS 

149. Company to have Board of Directors. 

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150. Manner  of  selection  of  independent  directors  and  maintenance  of  data  bank  of  independent 

directors. 

151. Appointment of director elected by small shareholders. 
152. Appointment of directors. 
153. Application for allotment of Director Identification Number. 
154. Allotment of Director Identification Number. 
155. Prohibition to obtain more than one Director Identification Number. 
156. Director to intimate Director Identification Number. 
157. Company to inform Director Identification Number to Registrar. 
158. Obligation to indicate Director Identification Number. 
159. Penalty for default of certain provisions. 
160. Right of persons other than retiring directors to stand for directorship. 
161. Appointment of additional director, alternate director and nominee director. 
162. Appointment of directors to be voted individually. 
163. Option to adopt principle of proportional representation for appointment of directors. 
164. Disqualifications for appointment of director. 
165. Number of directorships. 
166. Duties of directors. 
167. Vacation of office of director. 
168. Resignation of director. 
169. Removal of directors. 
170. Register of directors and key managerial personnel and their shareholding. 
171. Members’ right to inspect. 
172. Penalty. 

CHAPTER XII 

MEETINGS OF BOARD AND ITS POWERS 

173. Meetings of Board. 
174. Quorum for meetings of Board. 
175. Passing of resolution by circulation. 
176. Defects in appointment of directors not to invalidate actions taken. 
177. Audit committee. 
178. Nomination and Remuneration Committee and Stakeholders Relationship Committee. 
179. Powers of Board. 
180. Restrictions on powers of Board. 
181. Company to contribute to bona fide and charitable funds, etc. 
182. Prohibitions and restrictions regarding political contributions. 
183. Power of Board and other persons to make contributions to national defence fund, etc. 
184. Disclosure of interest by director. 
185. Loan to directors, etc. 
186. Loan and investment by company. 
187. Investments of company to be held in its own name. 
188. Related party transactions. 
189. Register of contracts or arrangements in which directors are interested. 
190. Contract of employment with managing or whole-time directors. 
191. Payment to director for loss of office, etc., in connection with transfer of undertaking, property or shares. 
192. Restriction on non-cash transactions involving directors. 
193. Contract by One Person Company. 
194. [Omitted.]. 
195. [Omitted.]. 

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CHAPTER XIII 

APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL 

SECTIONS 

196. Appointment of managing director, whole-time director or manager. 
197. Overall maximum managerial remuneration and managerial remuneration in case of absence or 

inadequacy of profits. 
198. Calculation of profits. 
199. Recovery of remuneration in certain cases. 
200. Central Government or company to fix limit with regard to remuneration. 
201. Forms of, and procedure in relation to, certain applications. 
202. Compensation for loss of office of managing or whole-time director or manager. 
203. Appointment of key managerial personnel. 
204. Secretarial audit for bigger companies. 
205. Functions of company secretary. 

CHAPTER XIV 

INSPECTION, INQUIRY AND INVESTIGATION 

206. Power to call for information, inspect books and conduct inquiries. 
207. Conduct of inspection and inquiry. 
208. Report on inspection made. 
209. Search and seizure. 
210. Investigation into affairs of company. 
211. Establishment of Serious Fraud Investigation Office. 
212. Investigation into affairs of company by Serious Fraud Investigation Office. 
213. Investigation into company’s affairs in other cases. 
214. Security for payment of costs and expenses of investigation. 
215. Firm, body corporate or association not to be appointed as inspector. 
216. Investigation of ownership of company. 
217. Procedure, powers, etc., of inspectors. 
218. Protection of employees during investigation. 
219. Power of inspector to conduct investigation into affairs of related companies, etc. 
220. Seizure of documents by inspector. 
221. Freezing of assets of company on inquiry and investigation. 
222. Imposition of restrictions upon securities. 
223. Inspector’s report. 
224. Actions to be taken in pursuance of inspector’s report. 
225. Expenses of investigation. 
226. Voluntary winding up of company, etc., not to stop investigation proceedings. 
227. Legal advisers and bankers not to disclose certain information. 
228. Investigation, etc., of foreign companies. 
229. Penalty for furnishing false statement, mutilation, destruction of documents. 

CHAPTER XV 

COMPROMISES, ARRANGEMENTS AND AMALGAMATIONS 

230. Power to compromise or make arrangements with creditors and members. 
231. Power to Tribunal to enforce compromise or arrangement. 
232. Merger and amalgamation of companies. 
233. Merger or amalgamation of certain companies. 
234. Merger or amalgamation of company with foreign company. 

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235. Power to acquire shares of shareholders dissenting from scheme or contract approved by 

majority. 

236. Purchase of minority shareholding. 
237. Power of Central Government to provide for amalgamation of companies in public interest. 
238. Registration of offer of schemes involving transfer of shares. 
239. Preservation of books and papers of amalgamated companies. 
240. Liability of officers in respect of offences committed prior to merger, amalgamation, etc. 

CHAPTER XVI 

PREVENTION OF OPPRESSION AND MISMANAGEMENT 

241. Application to Tribunal for relief in cases of oppression, etc. 
242. Powers of Tribunal. 
243. Consequence of termination or modification of certain agreements. 
244. Right to apply under section 241. 
245. Class action. 
246. Application of certain provisions to proceedings under section 241 or section 245. 

247. Valuation by registered valuers. 

CHAPTER XVII 

REGISTERED VALUERS 

CHAPTER XVIII 

REMOVAL OF NAMES OF COMPANIES FROM THE REGISTER OF COMPANIES 

248. Power of Registrar to remove name of company from register of companies. 
249. Restrictions on making application under section 248 in certain situations. 
250. Effect of company notified as dissolved. 
251. Fraudulent application for removal of name. 
252. Appeal to Tribunal. 

CHAPTER XIX 

REVIVAL AND REHABILITATION OF SICK COMPANIES 

253. [Omitted.]. 
254. [Omitted.]. 
255. [Omitted.]. 
256. [Omitted.]. 
257. [Omitted.]. 
258. [Omitted.]. 
259. [Omitted.]. 
260. [Omitted.]. 
261. [Omitted.]. 
262. [Omitted.]. 
263. [Omitted.]. 
264. [Omitted.]. 
265. [Omitted.]. 
266. [Omitted.]. 
267. [Omitted.]. 
268. [Omitted.]. 
269. [Omitted.]. 

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CHAPTER XX 

WINDING UP 

SECTIONS 

270. Winding up by Tribunal. 

PART I.—Winding up by the Tribunal 

271. Circumstances in which company may be wound up by Tribunal. 
272. Petition for winding up. 
273. Powers of Tribunal. 
274. Directions for filing statement of affairs. 
275. Company Liquidators and their appointments. 
276. Removal and replacement of  liquidator. 
277. Intimation to Company Liquidator, provisional liquidator and Registrar. 
278. Effect of winding up order. 
279. Stay of suits, etc., on winding up order. 
280. Jurisdiction of Tribunal. 
281. Submission of report by Company Liquidator. 
282. Directions of Tribunal on report of Company Liquidator. 
283. Custody of company’s properties. 
284. Promoters, directors, etc., to cooperate with Company Liquidator. 
285. Settlement of list of contributories and application of assets. 
286. Obligations of directors and managers. 
287. Advisory Committee. 
288. Submission of periodical reports to Tribunal. 
289. [Omitted.] 
290. Powers and duties of Company Liquidator. 
291. Provision for professional assistance to Company Liquidator. 
292. Exercise and control of Company Liquidator’s powers. 
293. Books to be kept by Company Liquidator. 
294. Audit of Company Liquidator’s accounts. 
295. Payment of debts by contributory and extent of set-off. 
296. Power of Tribunal to make calls. 
297. Adjustment of rights of contributories. 
298. Power to order costs. 
299. Power to summon persons suspected of having property of company, etc. 
300. Power to order examination of promoters, directors, etc. 
301. Arrest of person trying to leave India or abscond. 
302. Dissolution of company by Tribunal. 
303. Appeals from orders made before commencement of Act. 

[Omitted.]. 

304. [Omitted.]. 
305. [Omitted.]. 
306. [Omitted.]. 
307. [Omitted.]. 
308. [Omitted.]. 
309. [Omitted.]. 
310. [Omitted.]. 
311. [Omitted.]. 
312. [Omitted.]. 
313. [Omitted.]. 

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314. [Omitted.]. 
315. [Omitted.]. 
316. [Omitted.]. 
317. [Omitted.]. 
318. [Omitted.]. 
319. [Omitted.]. 
320. [Omitted.]. 
321. [Omitted.]. 
322. [Omitted.]. 
323. [Omitted.]. 

PART III.—Provisions applicable to every mode of winding up 

324. Debts of all descriptions to be admitted to proof. 
325. [Omitted.] 
326. Overriding preferential payments. 
327. Preferential payments. 
328. Fraudulent preference. 
329. Transfers not in good faith to be void. 
330. Certain transfers to be void. 
331. Liabilities and rights of certain persons fraudulently preferred. 
332. Effect of floating charge. 
333. Disclaimer of onerous property. 
334. Transfers, etc., after commencement of winding up to be void. 
335. Certain attachments, executions, etc., in winding up by Tribunal to be void. 
336. Offences by officers of companies in liquidation. 
337. Penalty for frauds by officers. 
338. Liability where proper accounts not kept. 
339. Liability for fraudulent conduct of business. 
340. Power of Tribunal to assess damages against delinquent directors, etc. 
341. Liability under sections 339 and 340 to extend to partners or directors in firms or companies. 
342. Prosecution of delinquent officers and members of company. 
343. Company Liquidator to exercise certain powers subject to sanction. 
344. Statement that company is in liquidation. 
345. Books and papers of company to be evidence. 
346. Inspection of books and papers by creditors and contributories. 
347. Disposal of books and papers of company. 
348. Information as to pending liquidations. 
349. Official Liquidator to make payments into public account of India. 
350. Company Liquidator to deposit monies into scheduled bank. 
351. Liquidator not to deposit monies into private banking account. 
352. Company Liquidation Dividend and Undistributed Assets Account. 
353. Liquidator to make returns, etc. 
354. Meetings to ascertain wishes of creditors or contributories. 
355. Court, tribunal or person, etc., before whom affidavit may be sworn. 
356. Power of Tribunal to declare dissolution of company void. 
357. Commencement of winding up by Tribunal. 
358. Exclusion of certain time in computing period of limitation. 

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PART IV.—Official Liquidators 

SECTIONS 

359. Appointment of Official Liquidator. 
360. Powers and functions of Official Liquidator. 
361. Summary procedure for liquidation. 
362. Sale of assets and recovery of debts due to company. 
363. Settlement of claims of creditors by Official Liquidator. 
364. Appeal by creditor. 
365. Order of dissolution of company. 

CHAPTER XXI 

PARTI.—Companies authorised to Register under this Act 

366. Companies capable of being registered. 
367. Certificate of registration of existing companies. 
368. Vesting of property on registration. 
369. Saving of existing liabilities. 
370. Continuation of pending legal proceedings. 
371. Effect of registration under this Part. 
372. Power of Court to stay or restrain proceedings. 
373. Suits stayed on winding up order. 
374. Obligations of companies registering under this Part. 

PART II.—Winding up of unregistered companies 

375. Winding up of unregistered companies. 
376. Power to wind up foreign companies although dissolved. 
377. Provisions of Chapter cumulative. 
378. Saving and construction of enactments conferring power to wind up partnership firm, association 

or company, etc., in certain cases. 

378A. Definitions. 

CHAPTER XXIA 
PRODUCER COMPANIES 
PART I 
PRELIMINARY 

PART II 

INCORPORATION OF PRODUCER COMPANIES AND OTHER MATTERS 

378B. Objects of producer company. 

378C. Formation of Producer Company and its registration. 

378D. Membership and voting rights of Members of Producer Company. 

378E. Benefits to Members. 

378F. Memorandum of Producer Company. 

378G.Articles of association. 

378H. Amendment of memorandum. 

378-I. Amendment of articles. 

378J. Option to inter-State co-operative societies to become Producer Companies. 

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378K. Effect of incorporation of Producer Company. 

378L.Vesting of undertaking in Producer Company. 

378M. Concession, etc., to be deemed to have been granted to Producer Company. 

378N. Provisions in respect of officers and other employees of inter-State co-operative society. 

PART III 

MANAGEMENT OF PRODUCER COMPANY 

378-O. Number of directors. 

378P. Appointment of directors. 

378Q. Vacation of office by directors. 

378R. Powers and functions of Board. 

378S. Matters to be transacted at general meeting. 

378T. Liability of directors. 

378U. Committee of directors. 

378V. Meetings of Board and quorum. 

378W. Chief Executive and his functions. 

378X. Secretary of Producer Company. 

378Y. Quorum. 

378Z. Voting rights. 

PART IV 

GENERAL MEETINGS 

378ZA. Annual general meetings. 

PART V 

SHARE CAPITAL AND MEMBERS RIGHTS 

378ZB. Share capital. 

378ZC. Special user rights. 

378ZD. Transferability of shares and attendant rights. 

PART VI 

FINANCE, ACCOUNTS AND AUDIT 

378ZE. Books of account. 

378ZF. Internal audit. 

378ZG. Duties of auditor under this Chapter. 

378ZH.Donation or subscription by Producer Company. 

378Z-I. General and other reserves. 

378ZJ. Issue of bonus shares. 

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PART VII 

LOANS TO MEMBERS AND INVESTMENTS 

378ZK. Loan, etc., to Members. 

378ZL. Investment in other companies, formation of subsidiaries, etc. 

378ZM. Penalty for contravention. 

PART VIII 

PENALTIES 

PART IX 

378ZN. Amalgamation, merger or division, etc., to form new Producer Companies. 

AMALGAMATION, MERGER OR DIVISION 

378Z-O. Disputes. 

PART X 

RESOLUTION OF DISPUTES 

PART XI 

MISCELLANEOUS PROVISIONS 

378ZP. Strike off name of Producer Company. 

378ZQ. Provisions of this Chapter to override other laws. 

378ZR. Application of provisions relating to private companies. 

PART XII 

RE-CONVERSION OF PRODUCER COMPANY TO INTER-STATE CO-OPERATIVE SOCIETY 

378ZS.Re-conversion of Producer Company to inter-State co-operative society. 

378ZT. Power to modify Act in its application to Producer Companies. 

378ZU. Power to make rules. 

CHAPTER XXII 

COMPANIES INCORPORATED OUTSIDE INDIA 

379. Application of Act to foreign companies. 
380. Documents, etc., to be delivered to Registrar by foreign companies. 
381. Accounts of foreign company. 
382. Display of name, etc., of foreign company. 
383. Service on foreign company. 
384. Debentures, annual return, registration of charges, books of account and their inspection. 
385. Fee for registration of documents. 
386. Interpretation. 
387. Dating of prospectus and particulars to be contained therein. 
388. Provisions as to expert’s consent and allotment.  
389. Registration of prospectus. 
390. Offer of Indian Depository Receipts. 
391. Application of sections 34 to 36 and Chapter XX. 
392. Punishment for contravention. 
393. Company’s failure to comply with provisions of this Chapter not to affect validity of contracts, 

etc. 

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CHAPTER XXIII 

GOVERNMENT COMPANIES 

SECTIONS 

394. Annual reports on Government companies. 
395. Annual reports where one or more State Governments are members of companies. 

CHAPTER XXIV 

REGISTRATION OFFICES AND FEES 

396. Registration offices. 
397. Admissibility of certain documents as evidence. 
398. Provisions relating to filing of applications, documents, inspection, etc., in electronic form. 
399. Inspection, production and evidence of documents kept by Registrar. 
400. Electronic form to be exclusive, alternative or in addition to physical form. 
401. Provision of value added services through electronic form. 
402. Application of provisions of Information Technology Act, 2000. 
403. Fee for filing, etc. 
404. Fees, etc., to be credited into public account. 

CHAPTER XXV 

COMPANIES TO FURNISH INFORMATION OR STATISTICS 

405. Power of Central Government to direct companies to furnish information or statistics. 

406. Provision relating to Nidhis and its application, etc. 

CHAPTER XXVI 

NIDHIS 

CHAPTER XXVII 

NATIONAL COMPANY LAW TRIBUNAL AND APPELLATE TRIBUNAL 

407. Definitions. 
408. Constitution of National Company Law Tribunal. 
409. Qualification of President and Members of Tribunal. 
410. Constitution of Appellate Tribunal. 
411. Qualifications of Chairperson and members of Appellate Tribunal. 
412. Selection of Members of Tribunal and Appellate Tribunal. 
413. Term of office of President, Chairperson and other Members. 
414. Salary, allowances and other terms and conditions of service of Members. 
415. Acting President and Chairperson of Tribunal or Appellate Tribunal. 
416. Resignation of Members. 
417. Removal of Members. 
 417A. Qualifications, terms and conditions of service of Chairperson and Member. 
418. Staff of Tribunal and Appellate Tribunal. 
419. Benches of Tribunal. 
420. Orders of Tribunal. 
421. Appeal from orders of Tribunal. 
422. Expeditious disposal by Tribunal and Appellate Tribunal. 
423. Appeal to Supreme Court.  
424. Procedure before Tribunal and Appellate Tribunal. 
425. Power to punish for contempt. 

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SECTIONS 

426. Delegation of powers. 
427. President, Members, officers, etc., to be public servants. 
428. Protection of action taken in good faith. 
429. Power to seek assistance of Chief Metropolitan Magistrate, etc. 
430. Civil court not to have jurisdiction. 
431. Vacancy in Tribunal or Appellate Tribunal not to invalidate acts or proceedings. 
432. Right to legal representation. 
433. Limitation. 
434. Transfer of certain pending proceedings. 

CHAPTER XXVIII 
SPECIAL COURTS 

435. Establishment of Special Courts. 
436. Offences triable by Special Courts. 
437. Appeal and revision. 
438. Application of Code to proceedings before Special Court. 
439. Offences to be non-cognizable. 
440. Transitional provisions. 
441. Compounding of certain offences. 
442. Mediation and Conciliation Panel. 
443. Power of Central Government to appoint company prosecutors. 
444. Appeal against acquittal. 
445. Compensation for accusation without reasonable cause. 
446. Application of fines. 
446A. Factors for determining level of punishment. 
446B. Lesser penalties for certain companies. 

CHAPTER XXIX 
MISCELLANEOUS 

447. Punishment for fraud. 
448. Punishment for false statement. 
449. Punishment for false evidence. 
450. Punishment where no specific penalty or punishment is provided. 
451. Punishment in case of repeated default. 
452. Punishment for wrongful withholding of property. 
453. Punishment for improper use of “Limited” or “Private Limited”. 
454. Adjudication of penalties. 
454A. Penalty for repeated default. 
455. Dormant company. 
456. Protection of action taken in good faith. 
457. Non-disclosure of information in certain cases. 
458. Delegation by Central Government of its powers and functions. 
459. Powers of Central Government of Tribunal to accord approval, etc., subject to conditions and to 

prescribe fees on applications. 

460. Condonation of delay in certain cases. 
461. Annual report by Central Government. 
462. Power to exempt class or classes of companies from provisions of this Act. 
463. Power of court to grant relief in certain cases. 
464. Prohibition of association or partnership of persons exceeding certain number. 
465. Repeal of certain enactments and savings. 
466. Dissolution of Company Law Board and consequential provisions. 
467. Power of Central Government to amend Schedules. 
468. Power of Central Government to make rules relating to winding up. 

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469. Power of Central Government to make rules. 
470. Power to remove difficulties. 

SCHEDULE I. 
SCHEDULE II. 
SCHEDULE III. 
SCHEDULE IV. 
SCHEDULE V. 
SCHEDULE VI. 
SCHEDULE VII. 

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THE COMPANIES ACT, 2013 

ACT NO. 18 OF 2013 

An Act to consolidate and amend the law relating to companies. 

BE it enacted by Parliament in the Sixty-fourth Year of the Republic of India as follows:— 

[29th August, 2013.] 

CHAPTER I 
PRELIMINARY 

1. Short title, extent, commencement and application.—(1) This Act may be called the Companies Act, 2013. 

(2) It extends to the whole of India. 

(3) This section shall come into force at once and the remaining provisions of this Act shall come into force on such date1 as 

the Central Government may, by notification in the Official Gazette, appoint and *different dates may  

*1. 12th September, 2013 – S. 2(1),(3), (4), (5), (6), (8), (9), (10), (11), (12), (14), (15), (16), (17), (18), (19), (20), (21), (22), (24), (25), (26), (27), (28), (29) [except 
sub-clause (iv)], (30), (32), (33), (34), (35), (36), (37), (38), (39), (40), (43), (44), (45), (46), (49), (50), (51), (52), (53), (54), (55), (56), (57), (58), (59), (60), (61), (63), 
(64), (65), (66), (67) [except sub-clause (ix)], (84), (86),(87) [except the proviso and Explanation (d)], (88), (89), (90), (91), (92), (93), (94), (95); s. 19, 21, 22, 23 
[except clause (b) of sub-section (1) and sub-section (2)], 24, 25 [except sub-section (3)], 29, 30, 31, 32, 33 [except sub-section (3)], 34, 35 [except clause (e) of sub-
section (1)], 36, 37, 38 39 [except sub-section (4)], 40 [except sub-section (6)], 44, 45, 49, 50, 51, 57, 58, 59, 60, 65, 69, 70 [except sub-section (2)], 86, 91, 100 [except 
sub-section (6)], 102, 103, 104, 105 [except the third and fourth provisos of sub-section (1) and sub-section (7)], 106, 107, 111, 112, 113 [except clause (b) of sub-
section (1)], 114, 116, 127, 133, 161 [except sub-section (2)], 162, 163, 176, 180, 181, 182, 183, 185, 192, 194,195, 202, 379, 382, 383, 386 [except clause (a)], 394, 
405, 407, 408, 409, 410, 411, 412, 413, 414, 439, 443, 444, 445, 446, 447, 448, 449, 450, 451, 452, 453, 456, 457, 458, 459, 460, 461, 462, 463, 467, 468, 469, 470, 
vide notification No. S.O. 2754(E), dated 12th September, 2013, see Gazette of India, Extraordinary, Part II, sec. 3(ii). 
1st April 2014 – S. 2(2), (7), (13), (31), (41), (42), (47), (48), (62), (83), (85) and  Explanation (d) of clause (87); ss. 3, 4,  5, 6; s. 7 [except sub-section (7)]; s. 8 [except 
sub-section (9)]; ss. 9, 10, 11, 12 and 13; s. 14 [except second proviso to sub-section (1) and sub-section (2)]; ss. 15, 16, 17 and 18; section 20; clause (b) of sub-section 
(1) and sub-section (2) of section 23; sub-section (3) of section 25; ss. 26, 27 and 28; sub-section (3) of s. 33; clause (e) of sub-section (1) of s. 35; sub-section (4) of s. 
39;        sub-section (6) of s. 40; ss. 41, 42 and 43; ss. 46 and 47; ss. 52, 53 and 54; s. 55 [except sub-section (3)]; s. 56; s. 61 [except proviso to clause (b) of sub-section 
(1)]; s. 62 [except sub-sections (4) to (6)]; ss. 63 and 64; ss. 67 and 68; sub-section (2) of section 70; s. 71 [except sub-sections (9) to (11)]; ss. 72 and 73; sub-section 
(1) of s. 74; ss. 76, 77, 78, 79, 80, 81, 82, 83, 84 and 85; ss. 87, 88, 89 and 90; ss. 92, 93, 94, 95 and 96; sub-section (6) of s.100; s. 101; third and fourth provisos to sub-
section (1) and sub-section (7) of  s. 105; ss. 108, 109 and 110; clause (b) of sub-section (1) of s. 113; s. 115; ss. 117and 118; s. 119 [except sub-section (4)]; ss. 120, 
121, 122 and 123; s. 126; ss. 128 and 129; s.134; ss. 136, 137, 138 and 139; s. 140 [except second proviso to sub-section (4) and sub-section (5)]; ss. 141, 142, 143, 144, 
145, 146, 147, 148, 149, 150, 151, 152, 153, 154, 155, 156, 157, 158, 159  and 160; sub-section (2) of s. 161; ss. 164, 165, 166, 167 and 168; s. 169 [except sub-section 
(4)]; ss. 170, 171, 172, 173, 174 and 175; ss. 177, 178 and 179; s. 184; ss. 186, 187, 188, 189, 190 and 191; s. 193; ss. 196, 197, 198, 199, 200 and 201; ss. 203, 204, 
205, 206, 207, 208, 209, 210  and 211; s. 212 [except  references of sub-section (10) of s. 66, sub-section (5) of s. 140], s. 213, sub-section (1) of s. 251 and sub-section 
(3) of s. 339 made in sub-section (6) and also sub-sections (8) to (10)]; ss. 214, 215; s. 216 [except sub-section (2)]; s. 217; ss. 219 and 220; s. 223; s. 224 [except sub-
sections (2) and (5)]; s. 225; ss. 228 and 229; ss. 366, 367, 368and 369; s. 370 (except the proviso); s. 371; s. 374; ss. 380and 381; ss. 384and 385; clause (a) of s. 386; 
ss. 387, 388, 389and 390; sub-section (1) of s. 391; ss. 392 and 393; ss. 395, 396, 397and 398; s. 399 [except reference of word Tribunal in sub-section (2)]; ss. 400, 
401, 402, 403and 404; s. 406; s. 442; ss. 454and 455; s. 464; Schs. I, II, III, IV, V and VI, vide notification No. S.O. 902(E), dated 26th March, 2014, see Gazette of 
India, Extraordinary, Part II, sec.3(ii). 
1st April, 2014 – S. 135 and Sch. VII, vide notification No. S.O. 582(E), dated 27th February, 2014, see Gazette of India, Extraordinary, Part II, sec. 3 (ii). 
6th June, 2014 –Sub-sections (2) and (3) of s. 74, vide notification No. S.O. 1459(E), dated 6th June, 2014, see Gazette of India, Extraordinary, Part II, sec. 3(ii).   
13th January, 2016–S. 125(5), (6) [except with respect to the manner of administration of the Investor Education and Protection Fund] and  (7), vide notification No. 
S.O. 125(E), see Gazette of India, Extraordinary, Part II, sec. 3(ii). 
18th May, 2016-S. 2(29) (iv), ss. 435 to 438 and s. 440, vide notification No. S.O. 1795(E), dated 18th May, 2016, see Gazette of India, Extraordinary, Part II, sec. 3(ii). 
1st June, 2016-S. 7(7) [except clause (c) and (d)], s. 14(2), second proviso to sub-section (1) of s. 14, s. 55 (3), proviso to clause (b) of sub-section (1) of s. 61; s. 62 (4) 
to (6), s. 71 (9), (10) and (11), s. 75; s. 97; s. 98 and s. 99; S. 119 (4), s. 130 and 131; second proviso to sub-section (4) and (5) of s. 140, s. 169(4), s. 213, s. 216 (2), s. 
218, s. 221, s. 222, s. 224 (5), ss. 241, 242 [except clause (b) of sub-section (1), cls. (c) and (g) of sub-section (2)], 243, 244 and 245; Reference of word “Tribunal” s. 
399 (2),ss. 415 to 433, s. 434 (1) (a) and (b)     & (2), s. 441and 466, vide notification No. S.O. 1934(E), dated 1st June, 2016, see Gazette of India, Extraordinary Part 
II, sec. 3(ii).   
7th September, 2016-S. 124, s. 125 (1) to (4), (6) [with respect to the manner of administration of the Investor Education and Protection Fund] and (8) to (11) vide 
Notification No. S.O. 2866(E), dated 5th September, 2016, see Gazette of India, Extraordinary, Part II, sec. 3(ii). 
9th September, 2016- S. 227, 242 (1) (b), (2) (c) & (g), s. 246, Ss. 337 to 341 (to the extent of their applicability for s. 246), vide notification No. S.O. 2912(E), dated 
9th September, 2016, see Gazette of India, Extraordinary, Part II, sec. 3(ii). 
15th December, 2016-S. 2 (23), s.7 (7) (c) and (d), s. 8 (9), s. 48, s. 66, s. 224 (2), s. 226, s. 230 [except sub-section (11) and (12)], and ss. 231 to 233, ss. 235 to 240, 
ss. 270 to 288, ss. 290 to 303, ss. 324, ss. 326 to 365, proviso to s. 370, ss. 372 to 373, ss. 375 to 378, s. 391 (2), s. 434 (1) cl. (c) vide notification No. S.O. 3677(E), 
dated 7th December, 2016, see Gazette of India, Extraordinary Part II, sec. 3 (ii). 
26th December, 2016-Ss. 248 to 252, vide notification No. S.Ó. 4167(E), dated 26th December, 2016, see Gazette of India, Extraordinary Part II, sec. 3 (ii). 
13th April, 2017- S. 234, vide notification No. S.O. 1182(E), dated 13th April, 2017, see Gazette of India, Extraordinary Part II, sec. 3 (ii). 
24th August, 2017-S. 212 (8), (9) and (10), vide notification No. S.O. 2751(E), dated 24th August, 2017, see Gazette of India, Extraordinary Part II, sec. 3 (ii). 
20th September, 2017-Proviso to clause (87) of s. 2, vide notification No. S.O. 3086(E), dated 20th September, 2017, see Gazette of India, Extraordinary Part II, sec. 3 
(ii). 
18th October, 2017-S. 247, vide notification No. S.O. 3393(E), dated 18th October, 2017, see Gazette of India, Extraordinary Part II, sec. 3(ii). 
21st March, 2018- S. 132 (3) and (11), vide notification No. S.O. 1316(E), dated 21st March, 2018, see Gazette of India, Extraordinary Part II, sec. 3(ii). 
1st October, 2018- S.132 (1) and (12), vide notification No. S.O. 5098(E), dated 1st October, 2018, see Gazette of India, Extraordinary Part II, sec. 3(ii). 
24th October, 2018- S. 132 (2), (4), (5), (10), (13), (14) and (15) vide notification No. S.O. 5385(E), dated 24th October, 2018, see Gazette of India, Extraordinary Part 
II, sec. 3(ii). 
30th January, 2019- S.465 in so far as they relate to the repeal of the Companies Act, 1956 (1 of 1956) [that in except in so far as they relate to the repeal of the Registration of Companies (Sikkim) 
Act, 1961 (Sikkim Act 8 of 1961)] vide notification No. S.O. 560(E), dated 30th January 2019, see Gazette of India, Extraordinary Part II, sec. 3(ii). 
1st July, 2019-S. 81, vide notification No. S.O. 2269(E), dated 15th August, 2019, see Gazette of India, Extraordinary Part II, sec. 3(ii). 
3rd February, 2020-S. 230 (11) and (12), vide notification No. S.O. 525(E), dated 3rd February, 2020, see Gazette of India, Extraordinary, Part II, sec. 3(ii). 
21st December, 2020-S. 1, 3,6 to 10 (both inclusive), s. 12 to 17 (both inclusive), clauses (a) and (b) of s. 18, s. 19 to 21 (both inclusive), clause (i) of s. 22, 24,26, 28 
to 31 (both inclusive), s. 33 to 39 (both inclusive), s. 41 to 44 (both inclusive), s. 46 to 51 (both inclusive), s. 54, 57, 61 and 63, vide notification No. S.O. 4646(E), dated 
21st December, 2020, see Gazette of India, Extraordinary, Part II, sec. 3 (ii). 
*. Vide Notification No. S.O. 3912 (E), dated 30th October, 2019, this Act is made applicable to the Union territory of Jammu and Kashmir and the Union territory of   
Ladakh. 

16 

 
 
                                                           
be appointed for different provisions of this Act and any reference in any provision to the commencement 
of this Act shall be construed as a reference to the coming into force of that provision. 

(4) The provisions of this Act shall apply to— 

(a) companies incorporated under this Act or under any previous company law; 
(b) insurance companies, except in so far as the said provisions are inconsistent with the provisions 
of the Insurance Act, 1938 (4 of 1938) or the Insurance Regulatory and Development Authority Act, 
1999 (41 of 1999); 

(c) banking companies, except in so far as the said provisions are inconsistent with the provisions 

of the Banking Regulation Act, 1949 (10 of 1949); 

(d)  companies  engaged  in  the  generation  or  supply  of  electricity,  except  in  so  far  as  the  said 

provisions are inconsistent with the provisions of the Electricity Act, 2003 (36 of 2003); 

(f)  such  body  corporate,  incorporated  by  any  Act  for  the  time  being  in  force,  as  the  Central 
Government may, by notification, specify in this behalf, subject to such exceptions, modifications or 
adaptation, as may be specified in the notification. 
2. Definitions.—In this Act, unless the context otherwise requires,— 

(1) “abridged prospectus” means a memorandum containing such salient features of a prospectus as 

may be specified by the Securities and Exchange Board by making regulations in this behalf; 

(2)  “accounting  standards”  means  the  standards  of  accounting  or  any  addendum  thereto  for 

companies or class of companies referred to in section 133; 

(3) “alter” or “alteration” includes the making of additions, omissions and substitutions; 
(4) “Appellate Tribunal” means the National Company Law Appellate Tribunal constituted under 

section 410; 

(5) “articles” means the articles of association of a company as originally framed or as altered from 

time to time or applied in pursuance of any previous company law or of this Act; 

(6)  “associate  company”,  in  relation  to  another  company,  means  a  company  in  which  that  other 
company has a significant influence, but which is not a subsidiary company of the company having such 
influence and includes a joint venture company. 

1[Explanation.—For the purpose of this clause,— 

 (a) the expression “significant influence” means control of at least twenty per cent. of total voting 

power, or control of or participation in business decisions 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;] 
(7) “auditing standards” means the standards of auditing or any addendum thereto for companies or 

class of companies referred to in sub-section (10) of section 143; 

(8) “authorised capital” or “nominal capital” means such capital as is authorised by the 
memorandum of a company to be the maximum amount of share capital of the company; 

(9) “banking company” means a banking company as defined in clause (c) of section 5 of the Banking 

Regulation Act, 1949 (10 of 1949); 

(10) “Board of Directors” or “Board”, in relation to a company, means the collective body of the 

directors of the company; 

(11) “body corporate” or “corporation” includes a company incorporated outside India, but does not 

include— 

(i) a co-operative society registered under any law relating to co-operative societies; and 
(ii) any other body corporate (not being a company as defined in this Act), which the Central 

Government may, by notification, specify in this behalf; 

(12) “book and paper” and “book or paper” include books of account, deeds, vouchers, writings, 

documents, minutes and registers maintained on paper or in electronic form; 

(13) “books of account” includes records maintained in respect of— 

1. The Explanation subs. by Act 1 of 2018, s. 2 (w.e.f. 7-5-2018). 

17 

 
  
                                                           
(i) all sums of money received and expended by a company and matters in relation to which the 

receipts and expenditure take place; 

(ii) all sales and purchases of goods and services by the company; 

(iii) the assets and liabilities of the company; and 

(iv) the items of cost as may be prescribed under section 148 in the case of a company which 

belongs to any class of companies specified under that section; 

(14) “branch office”, in relation to a company, means any establishment described  as such by the 

company; 

(15) “called-up capital” means such part of the capital, which has been called for payment; 

(16) “charge” means 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; 

(17) “chartered accountant” means a chartered accountant as defined in clause (b) of sub-section (1) 
of section 2 of the Chartered Accountants Act, 1949 (38 of 1949) who holds a valid certificate of practice 
under sub-section (1) of section 6 of that Act; 

(18) “Chief Executive Officer” means an officer of a company, who has been designated as such by 

it; 

(19) “Chief Financial Officer” means a person appointed as the Chief Financial Officer of a company; 

(20) “company” means a company incorporated under this Act or under any previous company law; 

(21) “company limited by guarantee” means a company having the liability of its members limited 
by the memorandum to such amount as the members may respectively undertake to contribute to the 
assets of the company in the event of its being wound up; 

(22) “company limited by shares” means a company having the liability of its members limited by 

the memorandum to the amount, if any, unpaid on the shares respectively held by them; 

1[(23) “Company Liquidator” means a person appointed by the Tribunal as the Company Liquidator 

in accordance with the provisions of section 275 for the winding up of a company under this Act;] 

(24) “company secretary” or “secretary” means a company secretary as defined in clause (c) of  sub-
section  (1)  of  section  2  of  the  Company  Secretaries  Act,  1980  (56  of  1980)  who  is  appointed  by  a 
company to perform the functions of a company secretary under this Act; 

(25) “company secretary in practice” means a company secretary who is deemed to be in practice 

under sub-section (2) of section 2 of the Company Secretaries Act, 1980 (56 of 1980); 

(26)  “contributory”  means a  person  liable  to  contribute  towards the  assets  of the  company  in the 

event of its being wound up. 

Explanation.—For the purposes of this clause, it is hereby clarified that a person holding fully  paid-
up shares in a company shall be considered as a contributory but shall have no liabilities of a contributory 
under the Act whilst retaining rights of such a contributory; 

(27) “control” shall include the right to appoint majority of the directors or to control the management 
or  policy  decisions  exercisable  by  a  person  or  persons  acting  individually  or  in  concert,  directly  or 
indirectly, including by virtue of their shareholding or management rights or shareholders agreements 
or voting agreements or in any other manner; 

1. Subs. by Act 31 of 2016, s. 255 and the Eleventh Schedule, for clause (23) (w.e.f. 15-11-2016). 

18 

 
                                                           
1[(28) “Cost Accountant” means a cost accountant as defined in clause (b) of sub-section (1) of section  2 of 
the  Cost  and  Works  Accountants  Act,  1959  (23  of  1959)   and  who  holds  a  valid  certificate  of  practice  under  
sub-section (1) of section 6 of that Act;] 

(29) “court” means— 

(i) the High Court having jurisdiction in relation to the place at which the registered office of the 
company concerned is situate, except to the extent to which jurisdiction has been conferred on any 
district court or district courts subordinate to that High Court under sub-clause (ii); 

(ii) the district court, in cases where the Central Government has, by notification, empowered any 
district court to exercise all or any of the jurisdictions conferred upon the High Court, within the scope 
of its jurisdiction in respect of a company whose registered office is situate in the district; 

(iii)  the  Court  of  Session  having  jurisdiction  to  try  any  offence  under  this  Act  or  under  any 

previous company law; 

(iv) the Special Court established under section 435; 

(v) any Metropolitan Magistrate or a Judicial Magistrate of the First Class having jurisdiction to 

try any offence under this Act or under any previous company law; 

(30) “debenture” includes debenture stock, bonds or any other instrument of a company evidencing a 

debt, whether constituting a charge on the assets of the company or not: 

2[Provided that— 

(a) the instruments referred to in Chapter III-D of the Reserve Bank of India Act, 1934 (2 of 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;] 

(31) “deposit” includes any receipt of money by way of deposit or loan or in any other form by a 
company, but does not include such categories of amount as may be prescribed in consultation with the 
Reserve Bank of India; 

(32) “depository” means a depository as defined in clause (e) of sub-section (1) of section 2 of the 

Depositories Act, 1996 (22 of 1996); 

(33)  “derivative”  means  the  derivative  as  defined  in  clause  (ac)  of  section  2  of  the  Securities 

Contracts (Regulation) Act, 1956 (42 of 1956); 

(34) “director” means a director appointed to the Board of a company; 

(35) “dividend” includes any interim dividend; 

(36)  “document”  includes  summons,  notice,  requisition,  order,  declaration,  form  and  register, 
whether issued, sent or kept in pursuance of this Act or under any other law for the time being in force 
or otherwise, maintained on paper or in electronic form; 

(37) “employees’ stock option” means the option given to the directors, officers or employees of a 
company  or  of  its  holding  company  or  subsidiary  company  or  companies,  if  any,  which  gives  such 
directors, officers or employees, the benefit or right to purchase, or to subscribe for, the shares of the 
company at a future date at a pre-determined price; 

1. Subs. by Act 1 of 2018, s. 2, for clause (28) (w.e.f. 9-2-2018). 
2. The Proviso ins. by s. 2, ibid. (w.e.f. 9-2-2018). 

19 

 
                                                           
(38)  “expert”  includes an engineer,  a  valuer,  a  chartered  accountant,  a  company  secretary,  a  cost 
accountant and any other person who has the power or authority to issue a certificate in pursuance of 
any law for the time being in force; 

(39) “financial institution” includes a scheduled bank, and any other financial institution defined or 

notified under the Reserve Bank of India Act, 1934 (2 of 1934); 

(40) “financial statement” in relation to a company, includes— 

(i) a balance sheet as at the end of the financial year; 

(ii) a profit and loss account, or in the case of a company carrying on any activity not for profit, 

an income and expenditure account for the financial year; 

(iii) cash flow statement for the financial year; 

(iv) a statement of changes in equity, if applicable; and 

(v) any explanatory note annexed to, or forming part of, any document referred to in sub-clause 

(i) to sub-clause (iv): 

Provided  that  the  financial  statement,  with  respect  to  One  Person  Company,  small  company  and 

dormant company, may not include the cash flow statement; 

(41) “financial year”, in relation to any company or body corporate, means the period ending on the 
31st day of March every year, and where it has been incorporated on or after the 1st day of January of a 
year, the period ending on the 31st day of March of the following year, in respect whereof financial 
statement of the company or body corporate is made up: 

1[Provided that where a company or body corporate, which is a holding company or a subsidiary 
or associate company of a company incorporated outside India and is required to follow a different 
financial  year  for  consolidation  of  its  accounts  outside  India,  the  Central  Government  may,  on  an 
application made by that company or body corporate in such form and manner as may be prescribed, 
allow any period as its financial year, whether or not that period is a year: 

Provided further that any application pending before the Tribunal as on the date of commencement 
of the Companies (Amendment) Act, 2019, shall be disposed of by the Tribunal in accordance with the 
provisions applicable to it before such commencement;] 

2[Provided also that] a  company  or  body  corporate,  existing  on  the  commencement  of this  Act, 
shall,  within  a  period  of  two  years  from  such  commencement,  align  its  financial  year  as  per  the 
provisions of this clause; 

(42) “foreign company” means any company or body corporate incorporated outside India which— 

(a) has a place of business in India whether by itself or through an agent, physically or through 

electronic mode; and 

(b) conducts any business activity in India in any other manner; 

(43) “free reserves” means such reserves which, as per the latest audited balance sheet of a company, 

are available for distribution as dividend: 

Provided that— 

(i)  any  amount  representing  unrealised  gains,  notional  gains  or  revaluation  of  assets,  whether 

shown as a reserve or otherwise, or 

(ii) any change in carrying amount of an asset or of a liability recognised in equity, including 

surplus in profit and loss account on measurement of the asset or the liability at fair value, 

shall not be treated as free reserves; 

1. The proviso subs. by Act 22 of 2019, s. 2 (w.e.f. 2-11-2018). 
2. Subs. by s. 2, ibid., for “Provided further that”  (w.e.f. 2-11-2018). 

20 

 
                                                           
(44)  “Global  Depository  Receipt”  means  any  instrument  in  the  form  of  a  depository  receipt,  by 
whatever  name  called,  created  by  a  foreign  depository  outside  India  and  authorised  by  a  company 
making an issue of such depository receipts; 

(45) “Government company” means any company in which not less than fifty-one per cent. of the 
paid-up share capital is held by the Central Government, or by any State Government or Governments, 
or  partly  by  the  Central  Government  and  partly  by  one  or  more  State  Governments,  and  includes  a 
company which is a subsidiary company of such a Government company; 

(46) “holding company”, in relation to one or more other companies, means a company of which 

such companies are subsidiary companies; 

1[Explanation.—For the purposes of this clause, the expression “company” includes any body corporate;] 

(47) “independent director” means an independent director referred to in sub-section (6) of section 

149; 

(48) “Indian Depository Receipt” means any instrument in the form of a depository receipt created 
by a domestic depository in India and authorised by a company incorporated outside India making an 
issue of such depository receipts; 

2* 

* 

* 

* 

* 

(50) “issued capital” means such capital as the company issues from time to time for subscription; 

(51) “key managerial personnel”, in relation to a company, means— 

(i) the Chief Executive Officer or the managing director or the manager; 

(ii) the company secretary; 

(iii) the whole-time director; 

(iv) the Chief Financial Officer; 3*** 

4[(v)  such other officer, not 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;] 

(52) “listed company” means a company which has any of its securities listed on any recognised 

stock exchange: 

5[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.] 

(53) “manager” means an individual who, subject to the superintendence, control and direction of 
the Board of Directors, has the management of the whole, or substantially the whole, of the affairs of a 
company, and includes a director or any other person occupying the position of a manager, by whatever 
name called, whether under a contract of service or not; 

(54)  “managing  director”  means  a  director  who,  by  virtue  of  the  articles  of  a  company  or  an 
agreement with the company or a resolution passed in its general meeting, or by its Board of Directors, 
is entrusted with substantial powers of management of the affairs of the company and includes a director 
occupying the position of managing director, by whatever name called. 

1. The Explanation ins. by Act 1 of 2018, s. 2  (w.e.f. 9-2-2018). 
2. Clause (49) omitted by s. 2, ibid. (w.e.f. 9-2-2018). 
3. The word “and” omitted by s. 2, ibid. (w.e.f. 9-2-2018). 
4. Subs. by s. 2, ibid., for sub-clause (v) (w.e.f. 9-2-2018). 
5. The Proviso ins. by Act 29 of 2020, s. 2 (w.e.f. 22-1-2021). 

21 

 
 
 
 
 
 
 
 
                                                           
Explanation.—For the purposes of this clause, the power to do administrative acts of a routine nature 
when so authorised by the Board such as the power to affix the common seal of the company to any 
document or to draw and endorse any cheque on the account of the company in any bank or to draw and 
endorse any negotiable instrument or to sign any certificate of share or to direct registration of transfer 
of any share, shall not be deemed to be included within the substantial powers of management; 

(55) “member”, in relation to a company, means— 

(i) the subscriber to the memorandum of the company who shall be deemed to have agreed to 
become member of the company, and on its registration, shall be entered as member in its register of 
members; 

(ii) every other person who agrees in writing to become a member of the company and whose 

name is entered in the register of members of the company; 

(iii) every person holding shares of the company and whose name is entered as a beneficial owner 

in the records of a depository; 

(56) “memorandum” means the memorandum of association of a company as originally framed or 

as altered from time to time in pursuance of any previous company law or of this Act; 

(57) “net worth” means the aggregate value of the paid-up share capital and all reserves created out 
of the profits 1[, securities premium account and debit or credit balance of 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; 

(58) “notification” means a notification published in the Official Gazette and the expression “notify” 

shall be construed accordingly; 

(59)  “officer”  includes  any  director,  manager  or  key  managerial  personnel  or  any  person  in 
accordance  with  whose  directions  or  instructions  the  Board  of  Directors  or  any  one  or  more  of  the 
directors is or are accustomed to act; 

(60) “officer who is in default”, for the purpose of any provision in this Act which enacts that an 
officer  of  the  company  who  is  in  default  shall  be  liable  to  any  penalty  or  punishment  by  way  of 
imprisonment, fine or otherwise, means any of the following officers of a company, namely:— 

(i) whole-time director; 

(ii) key managerial personnel; 

(iii) where there is no key managerial personnel, such director or directors as  specified by the 
Board in this behalf and who has or have given his or their consent in writing to the Board to such 
specification, or all the directors, if no director is so specified; 

(iv) any person who, under the immediate authority of the Board or any key managerial personnel, 
is  charged  with  any  responsibility  including  maintenance,  filing  or  distribution  of  accounts  or 
records, authorises, actively participates in, knowingly permits, or knowingly fails to take active steps 
to prevent, any default; 

(v) any person in accordance with whose advice, directions or instructions the Board of Directors 
of  the  company  is  accustomed  to  act,  other  than  a  person  who  gives  advice  to  the  Board  in  a 
professional capacity; 

(vi) every director, in respect of a contravention of any of the provisions of this Act, who is aware 
of such contravention by virtue of the receipt by him of any proceedings of the Board or participation 

1. Subs. by Act 1 of 2018, s. 2, for “and securities premium account” (w.e.f. 9-2-2018). 

22 

 
                                                           
in such proceedings without objecting to the same, or where such contravention had taken place with 
his consent or connivance; 

(vii)  in  respect  of  the  issue  or  transfer  of  any  shares  of  a  company,  the  share  transfer  agents, 

registrars and merchant bankers to the issue or transfer; 

(61)  “Official  Liquidator”  means  an  Official  Liquidator  appointed  under  sub-section  (1)  of               

section 59; 

(62) “One Person Company” means a company which has only one person as a member; 

(63) “ordinary or special resolution” means an ordinary resolution, or as the case may be, special 

resolution referred to in section 114; 

(64)  “paid-up  share  capital”  or  “share  capital  paid-up”  means  such  aggregate  amount  of  money 
credited as paid-up as is equivalent to the amount received as paid-up in respect of shares issued and 
also includes any amount credited as paid-up in respect of shares of the company, but does not include 
any other amount received in respect of such shares, by whatever name called; 

(65) “postal ballot” means voting by post or through any electronic mode; 

(66) “prescribed” means prescribed by rules made under this Act; 

(67) “previous company law” means any of the laws specified below:— 

(i) Acts relating to companies in force before the Indian Companies Act, 1866 (10 of 1866); 

(ii) the Indian Companies Act, 1866 (10 of 1866); 

(iii) the Indian Companies Act, 1882 (6 of 1882); 

(iv) the Indian Companies Act, 1913 (7 of 1913); 

(v) the Registration of Transferred Companies Ordinance, 1942 (Ord. 54 of 1942); 

(vi) the Companies Act, 1956 (1 of 1956); and 

(vii) any law corresponding to any of the aforesaid Acts or the Ordinances and in force— 

(A)  in  the  merged  territories  or  in  a  Part  B  State  (other  than  the  State  of  Jammu  and 
Kashmir*), or any part thereof, before the extension thereto of the Indian Companies Act, 1913 
(7 of 1913); or 

(B) in the State of Jammu and Kashmir*, or any part thereof, before the commencement of 
the Jammu and Kashmir (Extension of Laws) Act, 1956 (62 of 1956), in so far as banking, 
insurance  and  financial  corporations  are  concerned,  and  before  the  commencement  of  the 
Central Laws (Extension to Jammu and Kashmir) Act, 1968 (25 of 1968), in so far as other 
corporations are concerned; 

(viii) the Portuguese Commercial Code, in so far as it relates to sociedades anonimas; and 

(ix) the Registration of Companies (Sikkim) Act, 1961 (Sikkim Act 8 of 1961); 

(68) “private company” means a company having a minimum paid-up share capital 1*** as may be 

prescribed, and which by its articles,— 

(i) restricts the right to transfer its shares; 

(ii) except in case of One Person Company, limits the number of its members to two hundred: 

Provided that where two or more persons hold one or more shares in a company jointly, they shall, 

for the purposes of this clause, be treated as a single member: 

1. The words “of one lakh rupees or such higher paid-up share capital” omitted by Act 21 of 2015, s. 2 (w.e.f. 29-5-2015). 
*.  Vide Notification No. S.O. 3912 (E), dated 30th October, 2019, this Act is made applicable to the Union territory of Jammu 
and Kashmir and the Union territory of Ladakh. 

23 

 
                                                           
Provided further that— 

(A) persons who are in the employment of the company; and 

(B) persons who, having been formerly in the employment of the company, were members of the 
company while in that employment and have continued to be members after the employment ceased, 

shall not be included in the number of members; and 

(iii) prohibits any invitation to the public to subscribe for any securities of the company; 

(69) “promoter” means a person— 

(a) who has been named as such in a prospectus or is identified by the company in the annual 

return referred to in section 92; or 

(b) who has control over the affairs of the company, directly or in directly whether as a share 

holder, director or otherwise; or 

(c)  in  accordance  with  whose  advice,  directions  or  instructions  the  Board  of  Directors  of  the 

company is accustomed to act: 

Provided that nothing in sub-clause (c) shall apply to a person who is acting merely in a professional 

capacity; 

(70) “prospectus” means any document described or issued as a prospectus and includes a red herring 
prospectus referred to in section 32 or shelf prospectus referred to in section 31 or any notice, circular, 
advertisement or other document inviting offers from the public for the subscription or purchase of any 
securities of a body corporate; 

(71) “public company” means a company which— 

(a) is not a private company; 1[and] 

(b) has a minimum paid-up share capital 2*** as may be prescribed: 

Provided that a company which is a subsidiary of a company, not being a private company, shall be 
deemed  to  be  public  company  for  the  purposes  of  this  Act  even  where  such  subsidiary  company 
continues to be a private company in its articles ; 

(72) “public financial institution” means— 

(i)  the  Life  Insurance  Corporation  of  India,  established  under  section  3  of  the  Life  Insurance 

Corporation Act, 1956 (31 of 1956); 

(ii)  the  Infrastructure  Development  Finance  Company  Limited,  referred  to  in  clause  (vi)  of         

sub-section (1) of section 4A of the Companies Act, 1956 (1 of 1956) so repealed under section 465 
of this Act; 

(iii) specified company referred to in the Unit Trust of India (Transfer of Undertaking and Repeal) 

Act, 2002 (58 of 2002); 

(iv) institutions notified by the Central Government under sub-section (2) of section 4A of the 

Companies Act, 1956 (1 of 1956) so repealed under section 465 of this Act; 

(v) such other institution as may be notified by the Central Government in consultation with the 

Reserve Bank of India: 

Provided that no institution shall be so notified unless— 

(A) it has been established or constituted by or under any Central or State Act  1[other than this 

Act or the previous company law]; or 

1. Ins. by Act 1 of 2018, s. 2 (w.e.f. 9-2-2018). 
2. The words “of five lakh rupees or such higher paid-up capital,” omitted by Act 21 of 2015, s. 2 (w.e.f. 29-5-2015). 

24 

 
                                                           
 
(B) not less than fifty-one per cent. of the paid-up share capital is held or controlled by the Central 
Government or by any State Government or Governments or partly by the Central Government and 
partly by one or more State Governments; 

(73)  “recognised  stock  exchange”  means  a  recognised  stock  exchange  as  defined  in  clause  (f)  of 

section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956); 

(74) “register of companies” means the register of companies maintained by the Registrar on paper 

or in any electronic mode under this Act; 

(75) “Registrar” means a Registrar, an Additional Registrar, a Joint Registrar, a Deputy Registrar or 
an Assistant Registrar, having the duty of registering companies and discharging various functions under 
this Act; 

(76) “related party”, with reference to a company, means— 

(i) a director or his relative; 

(ii) a key managerial personnel or his relative; 

(iii) a firm, in which a director, manager or his relative is a partner; 

(iv) a private company in which a director or manager 1[or his relative] is a member or director; 

(v) a public company in which a director or manager is a director  2[and holds] along with his 

relatives, more than two per cent. of its paid-up share capital; 

(vi) any body corporate whose Board of Directors, managing director or manager is accustomed 

to act in accordance with the advice, directions or instructions of a director or manager; 

(vii) any person on whose advice, directions or instructions a director or manager is accustomed 

to act: 

Provided  that  nothing  in  sub-clauses  (vi)  and  (vii)  shall  apply  to  the  advice,  directions  or 

instructions given in a professional capacity; 

3[(viii) any body corporate which is— 

(A) a holding, subsidiary or an associate company of such company; 

(B) a subsidiary of a holding company to which it is also a subsidiary; or 

(C) an investing company or the venturer of the company. 

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]; 

(ix) such other person as may be prescribed; 

(77) “relative”, with reference to any person, means any one who is related to another, if— 

(i) they are members of a Hindu Undivided Family; 

(ii) they are husband and wife; or 

(iii) one person is related to the other in such manner as may be prescribed; 

(78) “remuneration” means any money or its equivalent given or passed to any person for services 

rendered by him and includes perquisites as defined under the Income-tax Act, 1961 (43 of 1961); 

(79) “Schedule” means a Schedule annexed to this Act; 

1. Ins. by S.O. 1894 (E), dated 24th July, 2014. 
2. Subs. by S.O. 1820 (E), dated 9th July, 2014 for “or holds” . 
3. Subs. by Act 1 of 2018, s. 2, for sub-clause (viii) (w.e.f. 9-2-2018). 

25 

 
                                                           
(80) “scheduled bank” means the scheduled bank as defined in clause (e) of section 2 of the Reserve 

Bank of India Act, 1934 (2 of 1934); 

(81) “securities” means the securities as defined in clause (h) of section 2 of the Securities Contracts 

(Regulation) Act, 1956 (42 of 1956); 

(82) “Securities and Exchange Board” means the Securities and Exchange Board of India established 

under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992); 

(83) “Serious Fraud Investigation Office” means the office referred to in section 211; 

(84) “share” means a share in the share capital of a company and includes stock; 

(85) “small company” means a company, other than a public company,— 

(i) paid-up share capital of which does not exceed fifty lakh rupees or such higher amount as may 

be prescribed which shall not be more than 1[ten crore rupees]; 2[and] 

(ii) turnover of which  3[as per profit and loss account for the immediately preceding financial 
year] does not exceed two crore rupees or such higher amount as may be prescribed which shall not 
be more than 4[one hundred crore rupees]: 

Provided that nothing in this clause shall apply to— 

(A) a holding company or a subsidiary company; 

(B) a company registered under section 8; or 

(C) a company or body corporate governed by any special Act; 

(86) “subscribed capital” means such part of the capital which is for the time being subscribed by the 

members of a company; 

(87)  “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— 

(i) controls the composition of the Board of Directors; or 

(ii)  exercises  or  controls  more  than  one-half  of  the  5[total  voting  power]  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; 

(c) the expression “company” includes any body corporate; 

(d) “layer” in relation to a holding company means its subsidiary or subsidiaries; 

1. Subs. by Act 1 of 2018, s. 2, for “five crore rupees” (w.e.f. 9-2-2018). 
2. Subs. by notification No. S.O. 504(E), dated 13th February, 2015, for word “or” (w.e.f. 13-2-2015). 
3. Subs. by Act 1 of 2018, s. 2, for “as per its last profit and loss account” (w.e.f. 9-2-2018). 
4. Subs. by s. 2, ibid., for “twenty crore rupees”(w.e.f. 9-2-2018). 
5. Subs. by s. 2, ibid., for “total share capital” (w.e.f. 7-5-2018).  

26 

 
                                                           
(88) “sweat equity shares” means such equity shares as are issued by a company to its directors or 
employees at a discount or for consideration, other than cash, for providing their know-how or making 
available rights in the nature of intellectual property rights or value additions, by whatever name called; 

(89) “total voting power”, in relation to any matter, means the total number of votes which may be 
cast in regard to that matter on a poll at a meeting of a company if all the members thereof or their 
proxies having a right to vote on that matter are present at the meeting and cast their votes; 

(90) “Tribunal” means the National Company Law Tribunal constituted under section 408; 
1[(91)   “turnover”  means  gross amount of revenue recognised in the profit and loss account  from the sale, 
supply, or distribution of goods or on account of services rendered, or both, by a company during a financial year;] 
(92) “unlimited company” means a company not having any limit on the liability of its members; 

(93) “voting right” means the right of a member of a company to vote in any meeting of the company 

or by means of postal ballot; 

(94) “whole-time director” includes a director in the whole-time employment of the company; 

2[(94A)  “winding  up”  means  winding  up  under  this  Act  or  liquidation  under  the  Insolvency  and 

Bankruptcy Code, 2016 (31 of 2016), as applicable;] 

(95) words and expressions used and not defined in this Act but defined in the Securities Contracts 
(Regulation) Act, 1956 (42 of 1956) or the Securities and Exchange Board of India Act, 1992                 (15 
of 1992) or the Depositories Act, 1996 (22 of 1996) shall have the meanings respectively assigned to 
them in those Acts. 

CHAPTER II 

INCORPORATION OF COMPANY AND MATTERS INCIDENTAL THERETO 

3. Formation of company.—(1) A company may be formed for any lawful purpose by— 

(a) seven or more persons, where the company to be formed is to be a public company; 

(b) two or more persons, where the company to be formed is to be a private company; or 

(c) one person, where the company to be formed is to be One Person Company that is to say, a 

private company, 

by subscribing their names or his name to a memorandum and complying with the requirements of this Act 
in respect of registration: 

Provided that the memorandum of One Person Company shall indicate the name of the other person, 
with his prior written consent in the prescribed form, who shall, in the event of the subscriber’s death or his 
incapacity to contract become the member of the company and the written consent of such person shall also 
be  filed  with  the  Registrar  at  the  time  of  incorporation  of  the  One  Person  Company  along  with  its 
memorandum and articles: 

Provided further that such other person may withdraw his consent in such manner as may be prescribed: 

Provided also that the member of One Person Company may at any time change the name of such other 

person by giving notice in such manner as may be prescribed: 

Provided also that it shall be the duty of the member of One Person Company to intimate the company 
the change, if any, in the name of the other person nominated by him by indicating in the memorandum or 
otherwise within such time and in such manner as maybe prescribed, and the company shall intimate the 
Registrar any such change within such time and in such manner as may be prescribed: 

Provided also that any such change in the name of the person shall not be deemed to be an alteration of 

the memorandum. 

1. Subs. by Act 1 of 2018, s. 2, for clause (91) (w.e.f. 9-2-2018). 
2. Ins. by Act 31 of 2016, s. 255 and the Eleventh Schedule (w.e.f. 15-11-2016). 

27 

 
 
 
                                                           
(2) A company formed under sub-section (1) may be either— 

(a) a company limited by shares; or 

(b) a company limited by guarantee; or 

(c) an unlimited company. 

1[3A. Members severally liable in certain cases.-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.] 

4. Memorandum.—(1) The memorandum of a company shall state— 

(a) the name of the company with the last word “Limited” in the case of a public limited company, 

or the last words “Private Limited” in the case of a private limited company: 

Provided that nothing in this clause shall apply to a company registered under section 8; 
(b) the State in which the registered office of the company is to be situated; 
(c) the objects for which the company is proposed to be incorporated and any matter considered 

necessary in furtherance thereof; 

(d) the liability of members of the company, whether limited or unlimited, and also state,— 

(i) in the case of a company limited by shares, that liability of its members is limited to the 

amount unpaid, if any, on the shares held by them; and 

(ii)  in  the  case  of  a  company  limited  by  guarantee,  the  amount  up  to  which  each  member 

undertakes to contribute— 

(A) to the assets of the company in the event of its being wound up while he is a member 
or within one year after he ceases to be a member, for payment of the debts and liabilities of 
the company or of such debts and liabilities as may have been contracted before he ceases to 
be a member, as the case may be; and 

(B) to the costs, charges and expenses of winding up and for adjustment of the rights of the 

contributories among themselves; 

(e) in the case of a company having a share capital,— 

(i) the amount of share capital with which the company is to be registered and the division 
thereof  into  shares  of  a  fixed  amount  and  the  number  of  shares  which  the  subscribers  to  the 
memorandum agree to subscribe which shall not be less than one share; and 

(ii) the number of shares each subscriber to the memorandum intends to take, indicated opposite 

his name; 
(f) in the case of One Person Company, the name of the person who, in the event of death of the 

subscriber, shall become the member of the company. 
(2) The name stated in the memorandum shall not— 

(a) be identical with or resemble too nearly to the name of an existing company registered under 

this Act or any previous company law; or 

(b) be such that its use by the company— 

(i) will constitute an offence under any law for the time being in force; or 
(ii) is undesirable in the opinion of the Central Government. 

(3) Without prejudice to the provisions of sub-section (2), a company shall not be registered with a 

name which contains— 

(a) any word or expression which is likely to give the impression that the company is in any way 
connected with, or having the patronage of, the Central Government, any State Government, or any 
local authority, corporation or body constituted by the Central Government or any State Government 
under any law for the time being in force; or 

1. Ins. by Act 1 of 2018, s. 3 (w.e.f. 9-2-2018). 

28 

 
                                                           
(b) such word or expression, as may be prescribed, 

unless the previous approval of the Central Government has been obtained for the use of any such word or 
expression. 

(4) A person may make an application, in such form and manner and accompanied by such fee, as may 

be prescribed, to the Registrar for the reservation of a name set out in the application as— 

(a) the name of the proposed company; or 

(b) the name to which the company proposes to change its name. 

(5) 1[(i) Upon receipt of an application under sub-section (4), the Registrar may, on the basis of information and 
documents furnished along with the application, reserve the name for a period of twenty days from the date of approval 
or such other period as may be prescribed: 

Provided that in case of an application for reservation of name or for change of its name by an existing company, 

the Registrar may reserve the name for a period of sixty days from the date of approval.] 

(ii) Where after reservation of name under clause (i), it is found that name was applied by furnishing 

wrong or incorrect information, then,— 

(a) if the company has not been incorporated, the reserved name shall be cancelled and the person 
making application under sub-section (4) shall be liable to a penalty which may extend to one lakh 
rupees; 

(b)  if  the  company  has  been  incorporated,  the  Registrar  may,  after  giving  the  company  an 

opportunity of being heard— 

(i) either direct the company to change its name within a period of three months, after passing 

an ordinary resolution; 

(ii) take action for striking off the name of the company from the register of companies; or 

(iii) make a petition for winding up of the company. 

(6) The memorandum of a company shall be in respective forms specified in Tables A, B, C, D and E 

in Schedule I as may be applicable to such company. 

(7) Any provision in the memorandum or articles, in the case of a company limited by guarantee and 
not having a share capital, purporting to give any person a right to participate in the divisible profits of the 
company otherwise than as a member, shall be void. 

5.  Articles.—(1)  The  articles  of  a  company  shall  contain  the  regulations  for  management  of  the 

company. 

(2) The articles shall also contain such matters, as may be prescribed: 

Provided  that  nothing  prescribed  in  this  sub-section  shall  be  deemed  to  prevent  a  company  from 

including such additional matters in its articles as may be considered necessary for its management. 

(3) The articles may contain provisions for entrenchment to the effect that specified provisions of the 
articles may be altered only if conditions or procedures as that are more restrictive than those applicable in 
the case of a special resolution, are met or complied with. 

(4)  The  provisions  for  entrenchment  referred  to  in  sub-section  (3)  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. 

(5)  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 such form and manner as 
may be prescribed. 

(6)  The  articles  of  a  company  shall  be  in  respective  forms  specified  in  Tables,  F,  G,  H,  I  and  J  in 

Schedule I as may be applicable to such company. 

1. Subs. by Act 1 of 2018, s. 4, for clause (i) (w.e.f. 26-1-2018). 

29 

 
                                                           
(7) A company may adopt all or any of the regulations contained in the model articles applicable to 

such company. 

(8) In case of any company, which is registered after the commencement of this Act, in so far as the 
registered articles of such company do not exclude or modify the regulations contained in the model articles 
applicable to such company, those regulations shall, so far as applicable, be the regulations of that company 
in the same manner and to the extent as if they were contained in the duly registered articles of the company. 
(9)  Nothing  in  this  section  shall  apply  to  the  articles  of  a  company  registered  under  any  previous 

company law unless amended under this Act. 

6. Act to override memorandum, articles, etc.—Save as otherwise expressly provided in this Act— 
(a) the provisions of this Act shall have effect notwithstanding anything to the contrary contained 
in the memorandum or articles of a company, or in any agreement executed by it, or in any resolution 
passed by the company in general meeting or by its Board of Directors, whether the same be registered, 
executed or passed, as the case may be, before or after the commencement of this Act; and 

(b)  any  provision  contained  in  the  memorandum,  articles,  agreement  or  resolution  shall,  to  the 

extent to which it is repugnant to the provisions of this Act, become or be void, as the case may be. 
7. Incorporation of company.—(1) There shall be filed with the Registrar within whose jurisdiction 
the registered office of a company is proposed to be situated, the following documents and information for 
registration, namely:— 

(a)  the  memorandum  and  articles  of  the  company  duly  signed  by  all  the  subscribers  to  the 

memorandum in such manner as may be prescribed; 

(b) a declaration in the prescribed form by an advocate, a chartered accountant, cost accountant or 
company secretary in practice, who is engaged in the formation of the company, and by a person named 
in the articles as a director, manager or secretary of the company, that all the requirements of this Act 
and the rules made thereunder in respect of registration and matters precedent or incidental thereto have 
been complied with; 

(c) 1[a declaration] from each of the subscribers to the memorandum and from persons named as 
the first directors, if any, in the articles that he is not convicted of any offence in connection with the 
promotion, formation or management of any company, or that he has not been found guilty of any fraud 
or misfeasance or of any breach of duty to any company under this Act or any previous company law 
during the preceding five years and that all the documents filed with the Registrar for registration of 
the company contain information that is correct and complete and true to the best of his knowledge and 
belief; 

(d) the address for correspondence till its registered office is established; 
(e) the particulars of name, including surname or family name, residential address, nationality and 
such other particulars of every subscriber to the memorandum along with proof of identity, as may be 
prescribed, and in the case of a subscriber being a body corporate, such particulars as may be prescribed; 
(f) the particulars of the persons mentioned in the articles as the first directors of the company, their 
names, including surnames or family names, the Director Identification Number, residential address, 
nationality and such other particulars including proof of identity as may be prescribed; and 

(g) the particulars of the interests of the persons mentioned in the articles as the first directors of 
the  company  in  other  firms  or  bodies  corporate  along  with  their  consent  to  act  as  directors  of  the 
company in such form and manner as may be prescribed. 
(2) The Registrar on the basis of documents and information filed under sub-section (1) shall register 
all the documents and information referred to in that sub-section in the register and issue a certificate of 
incorporation in the prescribed form to the effect that the proposed company is incorporated under this Act. 
(3) On and from the date mentioned in the certificate of incorporation issued under sub-section (2), the 
Registrar shall allot to the company a corporate identity number, which shall be a distinct identity for the 
company and which shall also be included in the certificate. 

1. Subs. by Act 1 of 2018, s. 5, for “an affidavit” (w.e.f. 27-7-2018). 

30 

 
                                                           
(4)  The  company  shall  maintain  and  preserve  at  its  registered  office  copies  of  all  documents  and 

information as originally filed under sub-section (1) till its dissolution under this Act. 

(5)  If  any  person  furnishes  any  false  or  incorrect  particulars  of  any  information  or  suppresses  any 
material information, of which he is aware in any of the documents filed with the Registrar in relation to 
the registration of a company, he shall be liable for action under section 447. 

(6) Without prejudice to the provisions of sub-section (5) where, at any time after the incorporation of 
a company, it is proved that the company has been got incorporated by furnishing any false or incorrect 
information or representation or by suppressing any material fact or information in any of the documents 
or declaration filed or made for incorporating such company, or by any fraudulent action, the promoters, 
the persons named as the first directors of the company and the persons making declaration under clause 
(b) of sub-section(1) shall each be liable for action under section 447. 

(7) Without prejudice to the provisions of sub-section (6), where a company has been got incorporated 
by furnishing any false or incorrect information or representation or by suppressing any material fact or 
information in any of the documents or declaration filed or made for incorporating such company or by any 
fraudulent action, the Tribunal may, on an application made to it, on being satisfied that the situation so 
warrants,— 

(a) pass such orders, as it may think fit, for regulation of the management of the company including 
changes, if any, in its memorandum and articles, in public interest or in the interest of the company and 
its members and creditors; or 

(b) direct that liability of the members shall be unlimited; or 

(c) direct removal of the name of the company from the register of companies; or 

(d) pass an order for the winding up of the company; or 

(e) pass such other orders as it may deem fit: 

Provided that before making any order under this sub-section,— 

(i) the company shall be given a reasonable opportunity of being heard in the matter; and 

(ii) the Tribunal  shall  take  into consideration  the transactions  entered  into  by  the  company, 

including the obligations, if any, contracted or payment of any liability. 

8. Formation of companies with charitable objects, etc.—(1) Where it is proved to the satisfaction 
of the Central Government that a person or an association of persons proposed to be registered under this 
Act as a limited company— 

(a) has in its objects the promotion of commerce, art, science, sports, education, research, social 

welfare, religion, charity, protection of environment or any such other object; 

(b) intends to apply its profits, if any, or other income in promoting its objects; and 

(c) intends to prohibit the payment of any dividend to its members, 

the  Central  Government  may,  by  licence  issued  in  such  manner  as  may  be  prescribed,  and  on  such 
conditions as it deems fit, allow that person or association of persons to be registered as a limited company 
under this section without the addition to its name of the word “Limited”, or as the case may be, the words 
“Private Limited”, and thereupon the Registrar shall, on application, in the prescribed form, register such 
person or association of persons as a company under this section. 

(2) The company registered under this section shall enjoy all the privileges and be subject to all the 

obligations of limited companies. 

(3) A firm may be a member of the company registered under this section. 
(4) (i) A company registered under this section shall not alter the provisions of its memorandum or 

articles except with the previous approval of the Central Government. 

(ii) A company registered under this section may convert itself into company of any other kind only 

after complying with such conditions as may be prescribed. 

31 

 
(5) Where it is proved to the satisfaction of the Central Government that a limited company registered 
under this Act or under any previous company law has been formed with any of the objects specified in 
clause (a) of sub-section (1) and with the restrictions and prohibitions as mentioned respectively in clauses 
(b) and (c) of that sub-section, it may, by licence, allow the company to be registered under this section 
subject to such conditions as the Central Government deems fit and to change its name by omitting the 
word  “Limited”,  or  as  the  case  may  be,  the  words  “Private  Limited”  from  its  name  and  thereupon  the 
Registrar shall, on application, in the prescribed form, register such company under this section and all the 
provisions of this section shall apply to that company. 

(6) The Central Government may, by order, revoke the licence granted to a company registered under 
this section if the company contravenes any of the requirements of this section or any of the conditions 
subject to which a licence is issued or the affairs of the company are conducted fraudulently or in a manner 
violative of the objects of the company or prejudicial to public interest, and without prejudice to any other 
action against the company under this Act, direct the company to convert its status and change its name to 
add the word” Limited” or the words “Private Limited”, as the case may be, to its name and thereupon the 
Registrar shall, without prejudice to any action that may be taken under sub-section (7), on application, in 
the prescribed form, register the company accordingly: 

Provided that no such order shall be made unless the company is given a reasonable opportunity of 

being heard: 

Provided further that a copy of every such order shall be given to the Registrar. 
(7) Where a licence is revoked under sub-section (6), the Central Government may, by order, if it is 
satisfied that it is essential in the public interest, direct that the company be wound up under this Act or 
amalgamated with another company registered under this section: 

Provided that no such order shall be made unless the company is given a reasonable opportunity of 

being heard. 

(8) Where a licence is revoked under sub-section (6) and where the Central Government is satisfied 
that  it  is  essential  in  the  public  interest  that  the  company  registered  under  this  section  should  be 
amalgamated  with  another  company  registered  under  this  section  and  having  similar  objects,  then, 
notwithstanding  anything  to  the  contrary  contained in  this  Act,  the  Central  Government  may,  by  order, 
provide for such amalgamation to form a single company with such constitution, properties, powers, rights, 
interest, authorities and privileges and with such liabilities, duties and obligations as may be specified in 
the order. 

(9) If on the winding up or dissolution of a company registered under this section, there remains, after 
the satisfaction of its debts and liabilities, any asset, they may be transferred to another company registered 
under this section and having similar objects, subject to such conditions as the Tribunal may impose, or 
may be sold and proceeds thereof credited to 1[Insolvency and Bankruptcy Fund formed under section 224 
of the Insolvency and Bankruptcy Code, 2016 (31 of 2016)]. 

(10) A company registered under this section shall amalgamate only with another company registered 

under this section and having similar objects. 

(11)  If  a  company  makes  any  default  in  complying  with  any  of  the  requirements  laid  down  in  this 
section, the company shall, without prejudice to any other action under the provisions of this section, be 
punishable with fine which shall not be less than ten lakh rupees but which may extend to one crore rupees 
and the directors and every officer of the company who is in default shall be punishable  2*** with fine 
which  shall  not  be  less  than  twenty-five  thousand  rupees  but  which  may  extend  to  3[twenty-five  lakh 
rupees]: 

Provided that when it is proved that the affairs of the company were conducted fraudulently, every 

officer in default shall be liable for action under section 447. 

9. Effect of registration.—From the date of incorporation mentioned in the certificate of incorporation, 
such subscribers to the memorandum and all other persons, as may, from time to time,      become members 

1. Subs. by Act 31 of 2016, s. 255 and the Eleventh Schedule, for “the Rehabilitation and Insolvency Fund formed under section 

269” (w.e.f. 15-11-2016). 

2. The words “with imprisonment for a term which may extend to three years or” omitted by Act 29 of 2020, s. 3 (w.e.f. 21-12-

2020). 

3. Subs. by Act 29 of 2020, s. 3, for “twenty-five lakh rupees, or with both” (w.e.f. 21-12-2020). 

32 

 
                                                           
of the company, shall be a body corporate by the name contained in the memorandum, capable of exercising 
all the functions of an incorporated company under this Act and having perpetual succession  1*** with 
power to acquire, hold and dispose of property, both movable and immovable, tangible and intangible, to 
contract and to sue and be sued, by the said name. 

10. Effect of memorandum and articles.—(1) Subject to the provisions of this Act, the memorandum 
and articles shall, when registered, bind the company and the members thereof to the same extent as if they 
respectively had been signed by the company and by each member, and contained covenants on its and his 
part to observe all the provisions of the memorandum and of the articles. 

(2) All monies payable by any member to the company under the memorandum or articles shall be a 

debt due from him to the company. 

2[10A. Commencement of business, etc.—(1) A company incorporated after the commencement of 
the Companies (Amendment) Act, 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.] 

11.  [Commencement  of  business,  etc.]  Omitted  by  the  Companies  (Amendment)  Act,  2015  (21  of 

2015), s. 4 (w.e.f. 29-5-2015). 

12. Registered office of company.—(1) A company shall, 3[within thirty days of its incorporation] and 
at all times thereafter, have a registered office capable of receiving and acknowledging all communications 
and notices as may be addressed to it. 

(2) The company shall furnish to the Registrar verification of its registered office within a period of 

thirty days of its incorporation in such manner as may be prescribed. 

(3) Every company shall— 

(a) paint or affix its name, and the address of its registered office, and keep the same  painted or 
affixed, on the outside of every office or place in which its business is carried on, in a conspicuous 
position, in legible letters, and if the characters employed therefor are not those of the language or of 
one of the languages in general use in that locality, also in the characters of that language or of one of 
those languages; 

4[(b) have its name engraved in legible characters on its seal, if any;] 
(c)  get  its  name,  address  of  its  registered  office  and  the  Corporate  Identity  Number  along  with 
telephone number, fax number, if any, e-mail and website addresses, if any, printed in all its business 
letters, billheads, letter papers and in all its notices and other official publications; and 

1. The words “and a common seal” omitted by Act 21 of 2015, s. 3 (w.e.f. 29-5-2015). 
2. Ins. by Act 22 of 2019, s. 3 (w.e.f. 2-11-2018). 
3. Subs. by Act 1 of 2018, s. 6, for “on and from the fifteenth day of its incorporation”(w.e.f. 27-7-2018). 
4. Subs. by Act 21 of 2015, s. 5, for clause (b) (w.e.f. 29-5-2015). 

33 

 
                                                           
(d) have its name printed on hundies, promissory notes, bills of exchange and such other documents 

as may be prescribed: 
Provided that where a company has changed its name or names during the last two years, it shall paint 
or affix or print, as the case may be, along with its name, the former name or names so changed during the 
last two years as required under clauses (a) and (c): 

Provided further that the words “One Person Company” shall be mentioned in brackets below the name 

of such company, wherever its name is printed, affixed or engraved. 

(4) Notice of every change of the situation of the registered office, verified in the manner prescribed, 
after the date of incorporation of the company, shall be given to the Registrar  1[within thirty days] of the 
change, who shall record the same. 

(5) Except on the authority of a special resolution passed by a company, the registered office of the 

company shall not be changed,— 

(a) in the case of an existing company, outside the local limits of any city, town or village where 
such office is situated at the commencement of this Act or where it may be situated later by virtue of a 
special resolution passed by the company; and 

(b) in the case of any other company, outside the local limits of any city, town or village where 
such office is first situated or where it may be situated later by virtue of a special resolution passed by 
the company: 

Provided that no company shall change the place of its registered office from the jurisdiction of one 
Registrar to the jurisdiction of another Registrar within the same State unless such change is confirmed by 
the Regional Director on an application made in this behalf by the company in the prescribed manner. 

(6) The confirmation referred to in sub-section (5) shall be communicated within a period of thirty days 
from the date of receipt of application by the Regional Director to the company and the company shall file 
the confirmation with the Registrar within a period of sixty days of the date of confirmation who shall 
register the same and certify the registration within a period of thirty days from the date of filing of such 
confirmation. 

(7) The certificate referred to in sub-section (6) shall be conclusive evidence that all the requirements 
of this Act with respect to change of registered office in pursuance of sub-section (5) have been complied 
with and the change shall take effect from the date of the certificate. 

(8) If any default is made in complying with the requirements of this section, the company and every 
officer who is in default shall be liable to a penalty of one thousand rupees for every day during which the 
default continues but not exceeding one lakh rupees. 

2[(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.] 

13. Alteration of memorandum.—(1) Save as provided in section 61, a company may, by a special 
resolution  and  after  complying  with  the  procedure  specified  in  this  section,  alter  the  provisions  of  its 
memorandum. 

(2) Any change in the name of a company shall be subject to the provisions of sub-sections (2) and (3) 

of section 4 and shall not have effect except with the approval of the Central Government in writing: 

Provided that no such approval shall be necessary where the only change in the name of the company 
is the deletion therefrom, or addition thereto, of the word “Private”, consequent on the conversion of any 
one class of companies to another class in accordance with the provisions of this Act. 

1. Subs. by Act 1 of 2018, s. 6, for “within fifteen days” (w.e.f. 27-7-2018). 
2. Ins. by Act 22 of 2019, s. 4 (w.e.f. 2-11-2018). 

34 

 
                                                           
(3) When any change in the name of a company is made under sub-section (2), the Registrar shall 

enter the new name in the register of companies in place of the old name and issue a fresh certificate of 
incorporation with the new name and the change in the name shall be complete and effective only on the 
issue of such a certificate. 

(4) The alteration of the memorandum relating to the place of the registered office from one State to 
another shall not have any effect unless it is approved by the Central Government on an application in such 
form and manner as may be prescribed. 

(5) The Central Government shall dispose of the application under sub-section (4) within a period of 
sixty days and before passing its order may satisfy itself that the alteration has the consent of the creditors, 
debenture-holders and other persons concerned with the company or that the sufficient provision has been 
made by the company either for the due discharge of all its debts and obligations or that adequate security 
has been provided for such discharge. 

(6) Save as provided in section 64, a company shall, in relation to any alteration of its memorandum, 

file with the Registrar— 

(a) the special resolution passed by the company under sub-section (1); 

(b) the approval of the Central Government under sub-section (2), if the alteration involves any 

change in the name of the company. 

(7) Where an alteration of the memorandum results in the transfer of the registered office of a company 
from one State to another, a certified copy of the order of the Central Government approving the alteration 
shall be filed by the company with the Registrar of each of the States within such time and in such manner 
as may be prescribed, who shall register the same, and the Registrar of the State where the registered office 
is being shifted to, shall issue a fresh certificate of incorporation indicating the alteration. 

(8) 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,  as  may  be  prescribed,  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  regulations  to  be  specified  by  the  Securities  and 
Exchange Board. 

(9) The Registrar shall register  any alteration of the memorandum with respect to the objects of the 
company and certify the registration within a period of thirty days from the date of filing of the special 
resolution in accordance with clause (a) of sub-section (6) of this section. 

(10) No alteration made under this section shall have any effect until it has been registered in accordance 

with the provisions of this section. 

(11) Any alteration of the memorandum, in the case of a company limited by guarantee and not having 
a share capital, purporting to give any person a right to participate in the divisible profits of the company 
otherwise than as a member, shall be void. 

14. Alteration of articles.—(1) 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 including  alterations 
having the effect of conversion of— 

(a) a private company into a public company; or 

(b) a public company into a private company: 

Provided that where a company being a private company alters its articles in such a manner that they 
no longer include the restrictions and limitations which are required to be included in the articles of a private 

35 

 
company  under  this  Act,  the  company  shall,  as  from  the  date  of  such  alteration,  cease  to  be  a  private 
company: 

1[Provided further that any alteration having the effect of conversion of a public company into a private 
company shall not valid unless it its approved by an order of the Central Government on an application 
made in such form and manner as may be prescribed: 

Provided also that any application pending before the Tribunal, as on the date of commencement of the 
Companies (amendment) Act, 2019, shall be disposed of by the Tribunal in accordance with the provisions 
applicable to it before such commencement.] 

(2)  Every  alteration  of  the  articles  under  this  section  and  a  copy  of  the  order  of  the  2[Central 
Government] approving the alteration as per sub-section (1) 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 of the articles registered under sub-section (2) shall, subject to the provisions of this 

Act, be valid as if it were originally in the articles. 

15. Alteration of memorandum or articles to be noted in every copy.—(1) Every alteration made in 
the memorandum or articles of a company shall be noted in every copy of the memorandum or articles, as 
the case may be. 

(2) If a company makes any default in complying with the provisions of sub-section (1), the company 
and every officer who is in default shall be liable to a penalty of one thousand rupees for every copy of the 
memorandum or articles issued without such alteration. 

16. Rectification of name of company.—(1) If, through inadvertence or otherwise, a company on its 

first registration or on its registration by a new name, is registered by a name which,— 

(a) in the opinion of the Central Government, is identical with or too nearly resembles the name by 
which a company in existence had been previously registered, whether under this Act or any previous 
company law, it may direct the company to change its name and the company shall change its name or 
new name, as the case may be, within a period of three months from the issue of such direction, after 
adopting an ordinary resolution for the purpose; 

(b) on an application by a registered proprietor of a trade mark that the name is identical with or 
too nearly resembles to a registered trade mark of such proprietor under the Trade Marks Act, 1999 (47 
of 1999), made to the Central Government within three years of incorporation or registration or change 
of name of the company, whether under this Act or any previous company law, in the opinion of the 
Central Government, is identical with or too nearly resembles to an existing trade mark, it may direct 
the company to change its name and the company shall change its name or new name, as the case may 
be,  within  a  3[period  of  three  months]  from  the  issue  of  such  direction,  after  adopting  an  ordinary 
resolution for the purpose. 
(2) Where a company changes its name or obtains a new name under sub-section (1), it shall within a 
period of fifteen days from the date of such change, give notice of the change to the Registrar along with 
the  order  of  the  Central  Government,  who  shall  carry  out  necessary  changes  in  the  certificate  of 
incorporation and the memorandum. 

4[(3) If a company is in default in complying with any direction given under sub-section (1), the Central 
Government shall allot a new name to the company in such manner as may be prescribed and the Registrar 
shall enter the new name in the register of companies in place of the old name and issue a fresh certificate 
of incorporation with the new name, which the company shall use thereafter: 

Provided that nothing in this sub-section shall prevent a company from subsequently changing its name 

in accordance with the provisions of section 13.] 

17. Copies of memorandum, articles, etc., to be given to members.—(1) A company shall, on being 
so requested by a member, send to him within seven days of the request and subject to the payment of such 
fees as may be prescribed, a copy of each of the following documents, namely:— 

1. Subs. by Act 22 of 2019, s. 5, for the Proviso (w.e.f. 2-11-2018). 
2. Subs. by s. 5, ibid., for “Tribunal” (w.e.f. 2-11-2018). 
3. Subs. by Act 29 of 2020, s. 4, for “period of six months” (w.e.f.1-9-2021). 
4. Subs. by s. 4, ibid., for sub-section (3) (w.e.f. 1-9-2021). 

36 

 
                                                           
(a) the memorandum; 

(b) the articles; and 

(c) every agreement and every resolution referred to in sub-section (1) of section117, if and in so 

far as they have not been embodied in the memorandum or articles. 

(2) If a company makes any default in complying with the provisions of this section, the company and 
every officer of the company who is in default shall be liable for each default, to a penalty of one thousand 
rupees for each day during which such default continues or one lakh rupees, whichever is less. 

18. Conversion of companies already registered.—(1) 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 this Chapter. 

(2) Where the conversion is required to be done under this section, the Registrar shall on an application 
made by the company, after satisfying himself that the provisions of this Chapter applicable for registration 
of companies have been complied with, close the former registration of the company and after registering 
the documents referred to in sub-section (1), issue a certificate of incorporation in the same manner as its 
first registration. 

(3) The registration of a company under this section shall not affect any debts, liabilities, obligations or 
contracts  incurred  or  entered  into,  by  or  on  behalf  of  the  company  before  conversion  and  such  debts, 
liabilities, obligations and contracts may be enforced in the manner as if such registration had not been 
done. 

19. Subsidiary company not to hold shares in its holding company.—(1) No company shall, either 
by itself or through its nominees, hold any shares in its holding company and no holding company shall 
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: 

Provided that nothing in this sub-section shall apply to a case— 

(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: 

Provided further that the subsidiary company referred to in the preceding proviso 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, as referred to in clause (a) or clause (b) of the said proviso. 

(2) The reference in this section to the shares of a holding company which is a company limited by 
guarantee or an unlimited company, not having a share capital, shall be construed as a reference to the 
interest of its members, whatever be the form of interest. 

20. Service of documents.—(1) A document may be served on a company or an officer thereof by 
sending it to the company or the officer at the registered office of the company by registered post or by 
speed post or by courier service or by leaving it at its registered office or by means of such electronic or 
other mode as may be prescribed: 

Provided that where securities are held with a depository, the records of the beneficial ownership may 

be served by such depository on the company by means of electronic or other mode. 

(2) Save as provided in this Act or the rules made thereunder for filing of documents with the Registrar 
in electronic mode, 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. 

37 

 
Explanation.—For the purposes of this section, the term  “courier” means a person or agency which 

delivers the document and provides proof of its delivery. 

21. Authentication of documents, proceedings and contracts.—Save as otherwise provided in this 

Act,— 

(a) a document or proceeding requiring authentication by a company; or 

(b) contracts made by or on behalf of a company, 

may be signed by any key managerial personnel or 1[an officer or employee of the company] duly authorised 
by the Board in this behalf. 

22. Execution of bills of exchange, etc.—(1) A bill of exchange, hundi or promissory note shall be 
deemed to have been made, accepted, drawn or endorsed on behalf of a company if made, accepted, drawn, 
or endorsed in the name of, or on behalf of or on account of, the company by any person acting under its 
authority, express or implied. 

(2) A company may, by writing 2[under its common seal, if any,] authorise any person, either generally 
or in respect of any specified matters, as its attorney to execute other deeds on its behalf in any place either 
in or outside India: 

3[Provided  that  in  case  a  company  does  not  have  a  common  seal,  the  authorisation  under  this                          

sub-section  shall  be  made  by  two  directors  or  by  a  director  and  the  Company  Secretary,  wherever  the 
company has appointed a Company Secretary.] 

(3)  A  deed  signed  by  such  an  attorney  on  behalf  of  the  company  and  under  his  seal  shall  bind  the 

company 4***. 

CHAPTER III 

PROSPECTUS AND ALLOTMENT OF SECURITIES 

PART I.—Public offer 

23. Public offer and private placement.—(1) A public company may issue securities— 

(a)  to  public  through  prospectus  (herein  referred  to  as  “public  offer”)  by  complying  with  the 

provisions of this Part; or 

(b) through private placement by complying with the provisions of Part II of this Chapter; or 

(c) through a rights issue or a bonus issue in accordance with the provisions of this Act and in case 
of a listed company or a company which intends to get its securities listed also with the provisions of 
the Securities and Exchange Board of India Act, 1992 (15 of 1992) and the rules and regulations made 
thereunder. 

(2) A private company may issue securities— 

(a) by way of rights issue or bonus issue in accordance with the provisions of this Act; or 

(b) through private placement by complying with the provisions of Part II of this Chapter. 

Explanation.—For the purposes of this Chapter, “public offer” includes initial public offer or further 
public offer of securities to the public by a company, or an offer for sale of securities to the public by an 
existing shareholder, through issue of a prospectus. 

24.  Power  of  Securities  and  Exchange  Board  to  regulate  issue  and  transfer  of  securities,             

etc.—(1) The provisions contained in this Chapter, Chapter IV and in section 127 shall,— 

(a) in so far as they relate to — 

(i) issue and transfer of securities; and 

1. Subs. by Act 1 of 2018, s. 7, for “an officer of the company” (w.e.f. 9-2-2018). 
2. Subs. by Act 21 of 2015, s. 6, for “under its common seal”  (w.e.f. 29-5-2015). 
3. The proviso ins. by s. 6, ibid. (w.e.f. 29-5-2015). 
4. The words “and have the effect as if it were made under its common seal” omitted by s. 6, ibid. (w.e.f. 29-5-2015). 

38 

 
                                                           
(ii) non-payment of dividend, 

by listed companies or those companies which intend to get their securities listed on any recognised 
stock  exchange  in  India,  except  as  provided  under  this  Act,  be  administered  by  the  Securities  and 
Exchange Board by making regulations in this behalf; 

(b) in any other case, be administered by the Central Government. 

Explanation.—For  the  removal  of  doubts,  it  is  hereby  declared  that  all  powers  relating  to  all  other 
matters relating to prospectus, return of allotment, redemption of preference shares and any other matter 
specifically  provided  in  this  Act,  shall  be  exercised  by  the  Central  Government,  the  Tribunal  or  the 
Registrar, as the case may be. 

(2) The Securities and Exchange Board shall, in respect of matters specified in sub-section (1) and the 
matters delegated to it under proviso to sub-section (1) of section 458, exercise the powers conferred upon 
it under sub-sections (1), (2A), (3) and (4) of section 11, sections 11A, 11B and 11D of the Securities and 
Exchange Board of India Act, 1992 (15 of 1992). 

25.  Document  containing  offer  of  securities  for  sale  to  be  deemed  prospectus.—(1)  Where  a 
company allots or agrees to allot any securities of the company with a view to all or any of those securities 
being offered for sale to the public, any document by which the offer for sale to the public is made shall, 
for all purposes, be deemed to be a prospectus issued by the company; and all enactments and rules of law 
as to the contents of prospectus and as to liability in respect of mis-statements, in and omissions from, 
prospectus, or otherwise relating to prospectus, shall apply with the modifications specified in  sub-sections 
(3)  and  (4)  and  shall  have  effect  accordingly,  as  if  the  securities  had  been  offered  to  the  public  for 
subscription and as if persons accepting the offer in respect of any securities were subscribers for those 
securities, but without prejudice to the liability, if any, of the persons by whom the offer is made in respect 
of mis-statements contained in the document or otherwise in respect thereof. 

(2) For the purposes of this Act, it shall, unless the contrary is proved, be evidence that an allotment of, 
or an agreement to allot, securities was made with a view to the securities being offered for sale to the 
public if it is shown— 

(a) that an offer of the securities or of any of them for sale to the public was made within six months 

after the allotment or agreement to allot; or 

(b) that at the date when the offer was made, the whole consideration to be received by the company 

in respect of the securities had not been received by it. 
(3) Section 26 as applied by this section shall have effect as if — 

(i) it required a prospectus to state in addition to the matters required by that section to be stated in 

a prospectus— 

(a) the net amount of the consideration received or to be received by the company in respect of 

the securities to which the offer relates; and 

(b) the time and place at which the contract where under the said securities have been or are to 

be allotted may be inspected; 
(ii) the persons making the offer were persons named in a prospectus as directors of a company. 
(4) Where a person making an offer to which this section relates is a company or a firm, it shall be 
sufficient if the document referred to in sub-section (1) is signed on behalf of the company or firm by two 
directors of the company or by not less than one-half of the partners in the firm, as the case may be. 

26.  Matters to  be  stated  in  prospectus.—(1)  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, 
1[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 (15 of 1992), in respect of such financial information or 
reports on financial information shall apply]; — 

1. Ins. by Act 1 of 2018, s. 8 (w.e.f. 7-5-2018).  

39 

 
 
 
                                                           
1* 

* 

* 

* 

* 

(c) 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 (42 of 1956) and the Securities and Exchange Board of India Act, 1992        (15 
of 1992) and the rules and regulations made thereunder; and 

2* 

* 

* 

* 

* 

(2) Nothing in sub-section (1) shall apply— 

(a) to the issue to existing members or debenture-holders of a company, of a prospectus or form of 
application  relating  to  shares  in  or  debentures  of  the  company,  whether  an  applicant  has  a  right  to 
renounce the shares or not under sub-clause (ii) of clause (a) of sub-section (1) of section 62 in favour 
of any other person; or 

(b) to the issue of a prospectus or form of application relating to shares or debentures which are, or 
are to be, in all respects uniform with shares or debentures previously issued and for the time being 
dealt in or quoted on a recognised stock exchange. 

(3) Subject to sub-section (2), the provisions of sub-section (1) shall apply to a prospectus or a form of 

application, whether issued on or with reference to the formation of a company or subsequently. 

Explanation.—The date indicated in the prospectus shall be deemed to be the date of its publication. 

(4) No prospectus shall be issued by or on behalf of a company or in relation to an intended company 
unless on or before the date of its publication, there has been delivered to the Registrar for 2[filing], a copy 
thereof signed by every person who is named there in as a director or proposed director of the company or 
by his duly authorised attorney. 

(5) A prospectus issued under sub-section (1) shall not include a statement purporting to be made by 
an expert unless the expert is a person who is not, and has not been, engaged or interested in the formation  
or  promotion  or  management,  of  the  company  and  has  given  his  written  consent  to  the  issue  of  the 
prospectus  and  has  not  withdrawn  such  consent  before  the  delivery  of  a  copy  of  the  prospectus  to  the 
Registrar for 1[filing] and a statement to that effect shall be included in the prospectus. 

(6) Every prospectus issued under sub-section (1) shall, on the face of it,— 

(a) state that a copy has been delivered for 1[filing] to the Registrar as required under               sub-

section (4); and 

(b) specify any documents required by this section to be attached to the copy so delivered or refer 

to statements included in the prospectus which specify these documents. 

3* 

* 

* 

* 

* 

 (8) No prospectus shall be valid if it is issued more than ninety days after the date on which a copy 

thereof is delivered to the Registrar under sub-section (4). 

(9) If a prospectus is issued in contravention of the provisions of this section, the company shall be 
punishable with fine which shall not be less than fifty thousand rupees but which may extend to three lakh 
rupees and every person who is knowingly a party to the issue of such prospectus shall be punishable 4*** 
with fine which shall not be less than fifty thousand rupees but which may extend to 5[three lakh rupees]. 

1. Clauses (a), (b) and (d) omitted by Act 1 of 2018, s. 8 (w.e.f. 7-5-2018). 
2. Subs. by Act 22 of 2019, s. 6, for “registration” (w.e.f. 15-8-2019). 
3. Sub-section (7) omitted by s. 6, ibid. (w.e.f. 15-8-2019). 
4. The words “with imprisonment for a term which may extend to three years or” omitted by Act 29 of 2020, s. 6 (w.e.f. 21-12-

2020). 

5. Subs. by s. 6, ibid., for “three lakh rupees, or with both” (w.e.f. 21-12-2020). 

40 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
27. Variation in terms of contract or objects in prospectus.—(1) A company shall not, at any time, 
vary the terms of a contract referred to in the prospectus or objects for which the prospectus was issued, 
except subject to the approval of, or except subject to an authority given by the company in general meeting 
by way of special resolution: 

Provided  that  the  details,  as  may  be  prescribed,  of  the  notice  in  respect  of  such  resolution  to 
shareholders, shall also be published in the newspapers (one in English and one in vernacular language) in 
the city where the registered office of the company is situated indicating clearly the justification for such 
variation: 

Provided further that such company shall not use any amount raised by it through prospectus for buying, 

trading or otherwise dealing in equity shares of any other listed company. 

(2) The dissenting shareholders being those shareholders who have not agreed to the proposal to vary 
the terms of contracts or objects referred to in the prospectus, shall be given an exit offer by promoters or 
controlling shareholders at such exit price, and in such manner and conditions as may be specified by the 
Securities and Exchange Board by making regulations in this behalf. 

28.  Offer  of  sale  of  shares  by  certain  members  of  company.—(1)  Where  certain  members  of  a 
company propose, in consultation with the Board of Directors to offer, in accordance with the provisions 
of any law for the time being in force, whole or part of their holding of shares to the public, they may do so 
in accordance with such procedure as may be prescribed. 

(2) Any document by which the offer of sale to the public is made shall, for all purposes, be deemed to 
be a prospectus issued by the company and all laws and rules made thereunder as to the contents of the 
prospectus and as to liability in respect of mis-statements in and omission from prospectus or otherwise 
relating to prospectus shall apply as if this is a prospectus issued by the company. 

(3) The members, whether individuals or bodies corporate or both, whose shares are proposed to be 
offered  to the  public,  shall  collectively  authorise  the company,  whose  shares are  offered  for sale to the 
public, to take all actions in respect of offer of sale for and on their behalf and they shall reimburse the 
company all expenses incurred by it on this matter. 

29. Public offer of securities to be in dematerialised form.—(1) Notwithstanding anything contained 

in any other provisions of this Act,— 

(a) every company making public offer; and 
(b) such other class or classes of 1*** companies as may be prescribed, 

shall issue the securities only in dematerialised form by complying with the provisions of the Depositories 
Act, 1996 (22 of 1996) and the regulations made thereunder. 

2[(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.] 

(2) Any company, other than a company mentioned in sub-section (1), may convert its securities into 
dematerialised form or issue its securities in physical form in accordance with the provisions of this Act or 
in dematerialised form in accordance with the provisions of the Depositories Act, 1996 (22 of 1996) and 
the regulations made thereunder. 

30.  Advertisement  of  prospectus.—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 objects, the liability of members and the amount of share capital of the company, and the names of the 
signatories to the memorandum and the number of shares subscribed for by them, and its capital structure. 
31. Shelf prospectus.—(1) 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 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 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)  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 

1. The word “public” omitted by Act 22 of 2019, s. 7 (w.e.f. 15-8-2019). 
2. Ins. by s. 7, ibid. (w.e.f. 15-8-2019). 

41 

 
                                                           
company as have occurred between the first offer of securities or the 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: 
Provided  that  where  a  company  or  any  other  person  has  received  applications  for  the  allotment  of 
securities along with advance payments of subscription before the making of any such change, the company 
or other person shall intimate the changes to such applicants and if they express a desire to withdraw their 
application, the company or other person shall refund all the monies received as subscription within fifteen 
days thereof. 

(3)  Where  an  information  memorandum  is  filed,  every  time  an  offer  of  securities  is  made  under           

sub-section (2), such memorandum together with the shelf prospectus shall be deemed to be a prospectus. 

Explanation.—For the purposes of this section, the expression “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. 

32. Red herring prospectus.—(1) A company proposing to make an offer of securities may issue a 

red herring prospectus prior to the issue of a prospectus. 

(2) A company proposing to issue a red herring prospectus under sub-section (1) shall file it with the 

Registrar at least three days prior to the opening of the subscription list and the offer. 

(3) A red herring prospectus shall carry the same obligations as are applicable to a prospectus and any 
variation  between  the  red  herring  prospectus  and  a  prospectus  shall  be  highlighted  as  variations  in  the 
prospectus. 

(4) Upon the closing of the offer of securities under this section, the prospectus stating therein the total 
capital raised, whether by way of debt or share capital, and the closing price of the securities and any other 
details as are not included in the red herring prospectus shall be filed with the Registrar and the Securities 
and Exchange Board. 

Explanation.—For  the  purposes  of  this  section,  the  expression  “red  herring  prospectus”  means  a 
prospectus which does not include complete particulars of the quantum or price of the securities included 
therein. 

33. Issue of application forms for securities.—(1) No form of application for the purchase of any of 

the securities of a company shall be issued unless such form is accompanied by an abridged prospectus: 

Provided that nothing in this sub-section shall apply if it is shown that the form of application was 

issued— 

(a) in connection with a bona fide invitation to a person to enter into an underwriting agreement 

with respect to such securities; or 

(b) in relation to securities which were not offered to the public. 

(2) A copy of the prospectus shall, on a request being made by any person before the closing of the 

subscription list and the offer, be furnished to him. 

(3) If a company makes any default in complying with the provisions of this section, it shall be liable 

to a penalty of fifty thousand rupees for each default. 

34. Criminal liability for mis-statements in prospectus.—Where a prospectus, issued, circulated or 
distributed under this Chapter, includes any statement which is untrue or misleading in form or context in 
which it is included or where any inclusion or omission of any matter is likely to mislead, every person who 
authorises the issue of such prospectus shall be liable under section 447: 

Provided that nothing in this section shall apply to a person if he proves that such statement or omission 
was immaterial or that he had reasonable grounds to believe, and did up to the time of issue of the prospectus 
believe, that the statement was true or the inclusion or omission was necessary. 

35. Civil liability for mis-statements in prospectus.—(1) Where a person has subscribed for securities 
of a company acting on any statement included, or the inclusion or omission of any matter, in the prospectus 

42 

 
which is misleading and has sustained any loss or damage as a consequence thereof, the company and every 
person who— 

(a) is a director of the company at the time of the issue of the prospectus; 

(b) has authorised himself to be named and is named in the prospectus as a director of the company, 

or has agreed to become such director, either immediately or after an interval of time; 

(c) is a promoter of the company; 

(d) has authorised the issue of the prospectus; and 

(e) is an expert referred to in sub-section (5) of section 26, 

shall, without prejudice to any punishment to which any person may be liable under section 36, be liable to 
pay compensation to every person who has sustained such loss or damage. 

(2) No person shall be liable under sub-section (1), if he proves— 

(a) that, having consented to become a director of the company, he withdrew his consent before the 

issue of the prospectus, and that it was issued without his authority or consent; or 

(b) that the prospectus was issued without his knowledge or consent, and that on becoming aware 
of its issue, he forthwith gave a reasonable public notice that it was issued without his knowledge or 
consent. 

1[(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  2[filing  of  a  copy  of  the  prospectus  with  the  Registrar]  or,  to  the 
defendant's knowledge, before allotment thereunder.] 

(3) Notwithstanding anything contained in this section, where it is proved that a prospectus has been 
issued with intent to defraud the applicants for the securities of a company or any other person or for any 
fraudulent purpose, every person referred to in sub-section (1) shall be personally responsible, without any 
limitation of liability, for all or any of the losses or damages that may have been incurred by any person 
who subscribed to the securities on the basis of such prospectus. 

36.  Punishment  for  fraudulently  inducing  persons  to  invest  money.  —Any  person  who,  either 
knowingly or recklessly makes any statement, promise or forecast which is false, deceptive or misleading, 
or deliberately conceals any material facts, to induce another person to enter into, or to offer to enter into,— 

(a) any agreement for, or with a view to, acquiring, disposing of, subscribing for, or underwriting 

securities; or 

(b) any agreement, the purpose or the pretended purpose of which is to secure a profit to any of the 

parties from the yield of securities or by reference to fluctuations in the value of securities; or 

(c)  any  agreement  for,  or  with  a  view  to  obtaining  credit  facilities  from  any  bank  or  financial 

institution, 

shall be liable for action under section 447. 

37. Action by affected persons.—A suit may be filed or any other action may be taken under section 
34 or section 35 or section 36 by any person, group of persons or any association of persons affected by 
any misleading statement or the inclusion or omission of any matter in the prospectus. 

38. Punishment for personation for acquisition, etc., of securities.—(1) Any person who— 

(a) makes or abets making of an application in a fictitious name to a company for acquiring, or 

subscribing for, its securities; or 

1. Ins. by Act 1 of 2018, s. 9 (w.e.f. 9-2-2018). 
2. Subs. by Act 22 of 2019, s. 8, for “delivery of a copy of the prospectus for registration” (w.e.f. 15-8-2019). 

43 

 
                                                           
(b) makes or abets making of multiple applications to a company in different names or in different 

combinations of his name or surname for acquiring or subscribing for its securities; or 

(c) otherwise induces directly or indirectly a company to allot, or register any transfer of, securities 

to him, or to any other person in a fictitious name, 

shall be liable for action under section 447. 

(2) The provisions of sub-section (1) shall be prominently reproduced in every prospectus issued by a 

company and in every form of application for securities. 

(3) Where a person has been convicted under this section, the Court may also order disgorgement of 

gain, if any, made by, and seizure and disposal of the securities in possession of, such person. 

(4) The amount received through disgorgement or disposal of securities under sub-section (3) shall be 

credited to the Investor Education and Protection Fund. 

39. Allotment of securities by company.—(1) No allotment of any securities of a company offered to 
the public for subscription shall be made unless the amount stated in the prospectus as the minimum amount 
has been subscribed and the sums payable on application for the amount so stated have been paid to and 
received by the company by cheque or other instrument. 

(2) The amount payable on application on every security shall not be less than five per cent. of the 
nominal amount of the security or such other percentage or amount, as may be specified by the Securities 
and Exchange Board by making regulations in this behalf. 

(3) If the stated minimum amount has not been subscribed and the sum payable on application is not 
received within a period of thirty days from the date of issue of the prospectus, or such other period as may 
be  specified  by  the  Securities  and  Exchange  Board,  the  amount  received  under sub-section  (1)  shall  be 
returned within such time and manner as may be prescribed. 

(4) Whenever a company having a share capital makes any allotment of securities, it shall file with the 

Registrar a return of allotment in such manner as may be prescribed. 

(5) In case of any default under sub-section (3) or sub-section (4), the company and its officer who is 
in default shall be liable to a penalty, for each default, of one thousand rupees for each day during which 
such default continues or one lakh rupees, whichever is less. 

40. Securities to be dealt with in stock exchanges.—(1) Every company making public offer shall, 
before making such offer, make an application to one or more recognised stock exchange or exchanges and 
obtain permission for the securities to be dealt with in such stock exchange or exchanges. 

(2) Where a prospectus states that an application under sub-section (1) has been made, such prospectus 

shall also state the name or names of the stock exchange in which the securities shall be dealt with. 

(3) All monies received on application from the public for subscription to the securities 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 where the securities have been permitted to be 

dealt with in the stock exchange or stock exchanges specified in the prospectus; or 

(b) for the repayment of monies within the time specified by the Securities and Exchange Board, 
received from applicants in pursuance of the prospectus, where the company is for any other reason 
unable to allot securities. 

(4) Any condition purporting to require or bind any applicant for securities to waive compliance with 

any of the requirements of this section shall be void. 

(5) If a default is made in complying with the provisions of this section, the company shall be punishable 
with a fine which shall not be less than five lakh rupees but which may extend to fifty lakh rupees and every 

44 

 
officer of the company who is in default shall be punishable 1*** or with fine which shall not be less than 
fifty thousand rupees but which may extend to 2[three lakh rupees]. 

(6) A company may pay commission to any person in connection with the subscription to its securities 

subject to such conditions as may be prescribed. 

41.  Global  depository  receipt.—A  company  may,  after  passing  a  special  resolution  in  its  general 
meeting, issue depository receipts in any foreign country in such manner, and subject to such conditions, 
as may be prescribed. 

PART II.—Private placement 

3[42. Issue of shares on private placement basis.—(1) A company may, subject to 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, 
(15 of 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 

1. The words “with imprisonment for a term which may extend to one year or” omitted by Act 29 of 2020, s. 7 (w.e.f. 21-12-

2020). 

2. Subs. by s. 7, ibid., for “three lakh rupees, or with both” (w.e.f. 21-12-2020). 
3. Subs. by Act 1 of 2018, s. 10 (w.e.f. 7-8-2018).  

45 

 
                                                           
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  (42 of 1956) and the 
Securities and Exchange Board of India Act, 1992 (15 of 1992) shall be applicable.] 

CHAPTER IV 

SHARE CAPITAL AND DEBENTURES 

43. Kinds of share capital.—The share capital of a company limited by shares shall be of two kinds, 

namely:— 

(a) equity share capital— 

(i) with voting rights; or 

(ii) with differential rights as to dividend, voting or otherwise in accordance with such rules as 

may be prescribed; and 

(b) preference share capital: 

Provided that nothing contained in this Act shall affect the rights of the preference share holders who 

are entitled to participate in the proceeds of winding up before the commencement of this Act. 

Explanation.—For the purposes of this section,— 

(i) “equity share capital”, with reference to any company limited by shares, means all share capital 

which is not preference share capital; 

(ii) “preference share capital”, with reference to any company limited by shares, means that part of 
the issued share capital of the company which carries or would carry a preferential right with respect 
to— 

(a) payment of dividend, either as a fixed amount or an amount calculated at a fixed rate, which 

may either be free of or subject to income-tax; and 

(b) repayment, in the case of a winding up or repayment of capital, of the amount of the share 
capital paid-up or deemed to have been paid-up, whether or not, there is a preferential right to the 
payment of any fixed premium or premium on any fixed scale, specified in the memorandum or 
articles of the company; 

46 

 
(iii) capital shall be deemed to be preference capital, notwithstanding that it is entitled to either or 

both of the following rights, namely:— 

(a) that in respect of dividends, in addition to the preferential rights to the amounts specified in 
sub-clause (a) of clause (ii), it has a right to participate, whether fully or to a limited extent, with 
capital not entitled to the preferential right aforesaid; 

(b) that in respect of capital, in addition to the preferential right to the repayment, on a winding 
up, of the amounts specified in sub-clause (b) of clause (ii), it has a right to participate, whether 
fully or to a limited extent, with capital not entitled to that preferential right in any surplus which 
may remain after the entire capital has been repaid. 

44. Nature of shares or debentures.—The shares or debentures or other interest of any member in a 

company shall be movable property transferable in the manner provided by the articles of the company. 

45. Numbering of shares.—Every share in a company having a share capital shall be distinguished by 

its distinctive number: 

Provided that nothing in this section shall apply to a share held by a person whose name is entered as 

holder of beneficial interest in such share in the records of a depository. 

46. Certificate of shares.—(1) A certificate, 1[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. 

(2) A duplicate certificate of shares may be issued, if such certificate — 

(a) is proved to have been lost or destroyed; or 

(b) has been defaced, mutilated or torn and is surrendered to the company. 

(3) Notwithstanding anything contained in the articles of a company, the manner of issue of a certificate 
of shares or the duplicate thereof, the form of such certificate, the particulars to be entered in the register of 
members and other matters shall be such as may be prescribed. 

(4) Where a share is held in depository form, the record of the depository is the prima facie evidence of 

the interest of the beneficial owner. 

(5) If a company with intent to defraud issues a duplicate certificate of shares, the company shall be 
punishable with fine which shall not be less than five times the face value of the shares involved in the issue 
of the duplicate certificate but which may extend to ten times the face value of such shares or rupees ten 
crores whichever is higher and every officer of the company who is in default shall be liable for action 
under section 447. 

47. Voting rights.—(1) Subject to the 2[provisions of section 43, sub-section (2) of section 50 and sub-

section (1) of section 188],— 

(a) every member of a company limited by shares and holding equity share capital therein, shall 

have a right to vote on every resolution placed before the company; and 

(b) his voting right on a poll shall be in proportion to his share in the paid-up equity share capital 

of the company. 

(2) Every member of a company limited by shares and holding any preference share capital therein 
shall, in respect of such capital, have a right to vote only on resolutions placed before the company which 
directly affect the rights attached to his preference shares and, any resolution for the winding up of the 
company or for the repayment or reduction of its equity or preference share capital and his voting right on 
a poll shall be in proportion to his share in the paid-up preference share capital of the company: 

1. Subs. by Act 21 of 2015, s. 7, for “issued under the common seal of the company” (w.e.f. 29-5-2015). 
2. Subs. by Act 1 of 2018, s. 11, for “provisions of section 43 and sub-section (2) of section 50” (w.e.f. 9-2-2018). 

47 

 
                                                           
Provided  that  the  proportion  of  the  voting  rights  of  equity  shareholders  to  the  voting  rights  of  the 
preference shareholders shall be in the same proportion as the paid-up capital in respect of the equity shares 
bears to the paid-up capital in respect of the preference shares: 

Provided further that where the dividend in respect of a class of preference shares has not been paid for 
a period of two years or more, such class of preference shareholders shall have a right to vote on all the 
resolutions placed before the company. 

48. Variations of shareholders’ rights.—(1) 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) 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 maybe, 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. 

(3)  The  decision  of  the  Tribunal  on  any  application  under  sub-section  (2)  shall  be  binding  on  the 

shareholders. 

(4) The company shall, within thirty days of the date of the order of the Tribunal, file a copy thereof 

with the Registrar. 

1* 

* 

* 

* 

* 

49. Calls on shares of same class to be made on uniform basis.—Where any calls for further share 
capital are made on the shares of a class, such calls shall be made on a uniform basis on all shares falling 
under that class. 

Explanation.—For the purposes of this section, shares of the same nominal value on which different 

amounts have been paid-up shall not be deemed to fall under the same class. 

50. Company to accept unpaid share capital, although not called up.—(1) A company may, if so 
authorised by its articles, accept from any member, the whole or a part of the amount remaining unpaid on 
any shares held by him, even if no part of that amount has been called up. 

(2) A member of the company limited by shares shall not be entitled to any voting rights in respect of 

the amount paid by him under sub-section (1) until that amount has been called up. 

51. Payment of dividend in proportion to amount paid-up.—A company may, if so authorised by 

its articles, pay dividends in proportion to the amount paid-up on each share. 

1. Sub-section (5) omitted by Act 29 of 2020, s. 8 (w.e.f. 21-12-2020). 

48 

 
 
 
 
 
 
 
 
                                                           
52. Application of premiums received on issue of shares.—(1) 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. 

(2)  Notwithstanding  anything  contained  in  sub-section  (1),  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. 

(3) The securities premium account may, notwithstanding anything contained in sub-sections (1) and 
(2), be applied by such class of companies, as may be prescribed and whose financial statement comply 
with the accounting standards prescribed for such class of companies under section 133,— 

(a) in paying up unissued equity shares of the company to be issued to members of the company as 

fully paid bonus shares; or 

(b) in writing off the expenses of or the commission paid or discount allowed on any issue of equity 

shares of the company; or 

(c) for the purchase of its own shares or other securities under section 68. 

53. Prohibition on issue of shares at discount.—(1) Except as provided in section 54, a company 

shall not issue shares at a discount. 

(2) Any share issued by a company at a 1[discount] shall be void. 
2[(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 (2 of 1934) or the Banking (Regulation) 
Act, 1949 (10 of 1949).] 

3[(3) Where any company fails to comply with the provisions of this section, such company and every 
officer who is in default shall be liable to a penalty which may extend to an amount equal to the amount 
raised through the issue of shares at a discount of five lakh rupees, whichever is less, and the company shall 
also be liable to refund all monies received with interest at the rate of twelve per cent. per annum from the 
date of issue of such shares to the persons to whom such shares have been issued.] 

54. Issue of sweat equity shares.—(1) Notwithstanding anything contained in section 53, a company 
may issue sweat equity shares of a class of shares already issued, if the following conditions are fulfilled, 
namely:— 

(a) the issue is authorised by a special resolution passed by the company; 

1. Subs. by Act 1 of 2018, s. 12, for “discounted price” (w.e.f. 9-2-2018). 
2. Ins. by s. 12, ibid. (w.e.f. 9-2-2018). 
3. Subs. by Act 22 of  2019, s. 9, for sub-section (3) (w.e.f. 2-11-2018). 

49 

 
                                                           
(b) 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; 

* 

1* 
 (d) 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 may be prescribed. 

* 

* 

* 

(2) 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. 

55. Issue and redemption of preference shares.—(1) No company limited by shares shall, after the 

commencement of this Act, issue any preference shares which are irredeemable. 

(2) A company limited by shares may, if so authorised by its articles, issue preference shares which are 
liable to be redeemed within a period not exceeding twenty years from the date of their issue subject to such 
conditions as may be prescribed: 

Provided  that  a  company  may  issue  preference  shares  for  a  period  exceeding  twenty  years  for 
infrastructure projects, subject to the redemption of such percentage of shares as may be prescribed on an 
annual basis at the option of such preferential shareholders: 

Provided further that— 

(a)  no  such  shares  shall  be  redeemed  except  out  of  the  profits  of  the  company  which  would 
otherwise  be  available  for  dividend  or  out  of  the  proceeds  of  a  fresh  issue  of  shares  made  for  the 
purposes of such redemption; 

(b) no such shares shall be redeemed unless they are fully paid; 

(c) where such shares are proposed to be redeemed out of the profits of the company, there shall, 
out of such profits, be transferred, a sum equal to the nominal amount of the shares to be redeemed, to 
a reserve, to be called the Capital Redemption Reserve 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 
Capital Redemption Reserve Account were paid-up share capital of the company; and 

(d) (i) in case  of  such  class  of  companies,  as  may  be  prescribed  and  whose  financial  statement 
comply with the accounting standards prescribed for such class of companies under section 133, the 
premium, if any, payable on redemption shall be provided for out of the profits of the company, before 
the shares are redeemed: 

Provided also that premium, if any, payable on redemption of any preference shares issued on or 
before the commencement of this Act by any such company shall be provided for out of the profits of 
the company or out of the company’s securities premium account, before such shares are redeemed. 

(ii) in a case not falling under sub-clause (i) above, the premium, if any, payable on redemption 
shall be provided for out of the profits of the company or out of the company’s securities premium 
account, before such shares are redeemed. 

 (3) Where a company is not in a position to redeem any preference shares or to pay dividend, if any, 
on such shares in accordance with the terms of issue (such shares hereinafter referred to as unredeemed 
preference shares), it may, with the consent of the holders of three-fourths in value of such preference shares 
and  with  the  approval  of  the  Tribunal  on  a  petition  made  by  it  in  this  behalf,  issue  further  redeemable 
preference shares equal to the amount due, including the dividend thereon, in respect of the unredeemed 
preference  shares,  and  on  the  issue  of  such  further  redeemable  preference  shares,  the  unredeemed 
preference shares shall be deemed to have been redeemed: 

1. Clause (c) omitted by Act 1 of 2018, s. 13 (w.e.f. 7-5-2018).  

50 

 
 
 
 
 
 
 
 
                                                           
Provided that the Tribunal shall, while giving approval under this sub-section, order the redemption 
forthwith  of  preference  shares  held  by  such  persons  who  have  not  consented  to  the  issue  of  further 
redeemable preference shares. 

Explanation.—For the removal  of  doubts,  it  is  hereby  declared  that the issue  of  further redeemable 
preference shares or the redemption of preference shares under this section shall not be deemed to be an 
increase or, as the case may be, a reduction, in the share capital of the company. 

(4) The capital redemption reserve account may, notwithstanding anything in this section, be applied 
by the company, in paying up unissued shares of the company to be issued to members of the company as 
fully paid bonus shares. 

Explanation.—For  the  purposes  of  sub-section  (2),  the  term  “infrastructure  projects”  means  the 

infrastructure projects specified in Schedule VI. 

56.Transfer and transmission of securities.—(1) A company shall not register a transfer of securities 
of the company, or the interest of a member in the company in the case of a company having no share 
capital, other than the transfer between persons both of whose names are entered as holders of beneficial 
interest  in  the  records  of  a  depository,  unless  a  proper  instrument  of  transfer,  in  such  form  as  may  be 
prescribed,  duly  stamped,  dated  and  executed  by  or  on  behalf  of  the  transferor  and  the  transferee  and 
specifying the name, address and occupation, if any, of the transferee has been delivered to the company 
by the transferor or the transferee within a period of sixty days from the date of execution, along with the 
certificate relating to the securities, or if no such certificate is in existence, along with the letter of allotment 
of securities: 

Provided that where the instrument of transfer has been lost or the instrument of transfer has not been 
delivered within the prescribed period, the company may register the transfer on such terms as to indemnity 
as the Board may think fit. 

(2) Nothing in sub-section (1) shall prejudice the power of the company to register, on receipt of an 
intimation of transmission of any right to securities by operation of law from any person to whom such 
right has been transmitted. 

(3) Where an application is made by the transferor alone and relates to partly paid shares, the transfer 
shall not be registered, unless the company gives the notice of the application, in such manner as may be 
prescribed, to the transferee and the transferee gives no objection to the transfer within two weeks from the 
receipt of notice. 

(4) Every company shall, unless prohibited by any provision of law or any order of Court, Tribunal or 

other authority, deliver the certificates of all securities allotted, transferred or transmitted— 

(a) within a period of two months from the date of incorporation, in the case of subscribers to the 

memorandum; 

(b) within a period of two months from the date of allotment, in the case of any allotment of any of 

its shares; 

(c) within a period of one month from the date of receipt by the company of the instrument of 
transfer under sub-section (1) or, as the case may be, of the intimation of transmission under                sub-
section (2), in the case of a transfer or transmission of securities; 

(d)  within  a  period  of  six  months  from  the  date  of  allotment  in  the  case  of  any  allotment  of 

debenture: 

Provided that where the securities are dealt with in a depository, the company shall intimate the details 

of allotment of securities to depository immediately on allotment of such securities. 

(5) The transfer of any security or other interest of a deceased person in a company made by his legal 
representative shall, even if the legal representative is not a holder thereof, be valid as if he had been the 
holder at the time of the execution of the instrument of transfer. 

51 

 
1[(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.] 

(7)  Without  prejudice  to  any  liability  under  the  Depositories  Act,  1996  (22  of  1996),  where  any 
depository or depository participant, with an intention to defraud a person, has transferred shares, it shall 
be liable under section 447. 

57. Punishment for personation of shareholder.—If any person deceitfully personates as an owner 
of any security or interest in a company, or of any share warrant or coupon issued in pursuance of this Act, 
and thereby obtains or attempts to obtain any such security or interest or any such share warrant or coupon, 
or  receives  or  attempts  to  receive  any  money  due  to  any  such  owner,  he  shall  be  punishable  with 
imprisonment for a term which shall not be less than one year but which may extend to three years and with 
fine which shall not be less than one lakh rupees but which may extend to five lakh rupees. 

58. Refusal of registration and appeal against refusal.—(1) If a private company limited by shares 
refuses, whether in pursuance of any power of the company under its articles or otherwise, to register the 
transfer of, or the transmission by operation of law of the right to, any securities or interest of a member in 
the company, it shall within a period of thirty days from the date on which the instrument of transfer, or the 
intimation of such transmission, as the case may be, was delivered to the company, send notice of the refusal 
to the transfer or and the transferee or to the person giving intimation of such transmission, as the case may 
be, giving reasons for such refusal. 

(2)  Without  prejudice  to  sub-section  (1),  the  securities  or  other  interest  of  any  member  in  a  public 

company shall be freely transferable: 

Provided  that  any  contract  or  arrangement  between  two  or  more  persons  in  respect  of  transfer  of 

securities shall be enforceable as a contract. 

(3) The transferee may appeal to the Tribunal against the refusal within a period of thirty days from the 
date of receipt of the notice or in case no notice has been sent by the company, within a period of sixty days 
from the date on which the instrument of transfer or the intimation of transmission, as the case may be, was 
delivered to the company. 

(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 or the intimation of transmission, as 
the case may be, 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 or intimation of transmission, appeal to the Tribunal. 

(5) The Tribunal, while dealing with an appeal made under sub-section (3) or 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. 

(6) If a person contravenes the order of the Tribunal under this section, he shall be punishable with 
imprisonment for a term which shall not be less than one year but which may extend to three years and with 
fine which shall not be less than one lakh rupees but which may extend to five lakh rupees. 

59. Rectification of register of members.—(1) If the name of any person is, without sufficient cause, 
entered in the register of members of a company, or after having been entered in the register, is, without 
sufficient cause, omitted there from, or if a default is made, or unnecessary delay takes place in entering in 
the register, the fact of any person having become or ceased to be a member, the person aggrieved, or any 
member of the company, or the company may appeal in such form as may be prescribed, to the Tribunal, 

1. Subs. by Act 29 of 2020, s. 9, for sub-section (6) (w.e.f. 21-12-2020). 

52 

 
                                                           
or to a competent court outside India, specified by the Central Government by notification, in respect of 
foreign members or debenture holders residing outside India, for rectification of the register. 

(2) The Tribunal  may,  after  hearing  the  parties to  the  appeal  under  sub-section  (1)  by  order,  either 
dismiss the appeal or direct that the transfer or transmission shall be registered by the company within a 
period of ten days of the receipt of the order or direct rectification of the records of the depository or the 
register and in the latter case, direct the company to pay damages, if any, sustained by the party aggrieved. 

(3) The provisions of this section shall not restrict the right of a holder of securities, to transfer such 
securities and any person acquiring such securities shall be entitled to voting rights unless the voting rights 
have been suspended by an order of the Tribunal. 

(4)  Where  the  transfer  of  securities  is  in  contravention  of  any  of  the  provisions  of  the  Securities 
Contracts  (Regulation)  Act,  1956  (42  of  1956),  the  Securities  and  Exchange  Board  of  India  Act,  1992        
(15 of 1992) or this Act or any other law for the time being in force, the Tribunal may, on an application 
made by the depository, company, depository participant, the holder of the securities or the Securities and 
Exchange Board, direct any company or a depository to set right the contravention and rectify its register 
or records concerned. 

1* 

* 

* 

* 

*. 

60.  Publication  of  authorised,  subscribed  and  paid-up  capital.—(1)  Where  any  notice, 
advertisement or other official publication, or any business letter, billhead or letter paper of a company 
contains a statement of the amount of the authorised capital of the company, such notice, advertisement or 
other official publication, or such letter, billhead or letter paper shall also contain a statement, in an equally 
prominent position and in equally  conspicuous characters,  of the amount  of the  capital  which  has been 
subscribed and the amount paid-up. 

(2) If any default is made in complying with the requirements of sub-section (1), the company shall be 
liable to pay a penalty of ten thousand rupees and every officer of the company who is in default shall be 
liable to pay a penalty of five thousand rupees, for each default. 

61. Power of limited company to alter its share capital.—(1) A limited company having a share 

capital may, if so authorised by its articles, alter its memorandum in its general meeting to— 

(a) increase its authorised share capital by such amount as it thinks expedient; 

(b) consolidate  and  divide all  or any  of  its share  capital  into  shares  of  a larger amount  than its 

existing shares: 

Provided that no consolidation and division which results in changes in the voting percentage of 
shareholders  shall  take  effect  unless  it  is  approved  by  the  Tribunal  on  an  application  made  in  the 
prescribed manner; 

(c) convert all or any of its fully paid-up shares into stock, and reconvert that stock into fully paid-

up shares of any denomination; 

(d)  sub-divide  its  shares,  or  any  of  them,  into  shares  of  smaller  amount  than  is  fixed  by  the 
memorandum, so, however, that in the sub-division the proportion between the amount paid and the 
amount, if any, unpaid on each reduced share shall be the same as it was in the case of the share from 
which the reduced share is derived; 

(e) cancel shares which, at the date of the passing of the resolution in that behalf, have not been 
taken or agreed to be taken by any person, and diminish the amount of its share capital by the amount 
of the shares so cancelled. 

(2) The cancellation of shares under sub-section (1) shall not be deemed to be a reduction of share 

capital. 

62. Further issue of share capital.—(1) Where at any time, a company having a share capital proposes 

to increase its subscribed capital by the issue of further shares, such shares shall be offered— 

1. Sub-section (5) omitted by Act 29 of 2020, s. 10 (w.e.f. 21-12-2020). 

53 

 
 
 
 
 
 
 
 
 
                                                           
(a)  to  persons  who,  at  the  date  of  the  offer,  are  holders  of  equity  shares  of  the  company  in 
proportion, as nearly as circumstances admit, to the paid-up share capital on those shares by sending a 
letter of offer subject to the following conditions, namely:— 

(i) the offer shall be made by notice specifying the number of shares offered and limiting a time 
not being  less than fifteen days  1[or such lesser number of days as may be prescribed] 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; 

(ii) unless the articles of the company otherwise provide, the offer aforesaid shall be deemed 
to include a right exercisable by the person concerned to renounce the shares offered to him or any 
of  them  in  favour  of  any  other  person;  and  the  notice  referred  to  in  clause  (i)  shall  contain  a 
statement of this right; 

(iii)  after  the  expiry  of  the  time  specified  in  the  notice  aforesaid,  or  on  receipt  of  earlier 
intimation  from  the  person  to  whom  such  notice  is  given  that  he  declines  to  accept  the  shares 
offered, the Board of Directors may dispose of them in such manner which is not                       dis-
advantageous to the share holders and the company; 

(b) to employees under a scheme of employees’ stock option, subject to special resolution passed 

by company and subject to such conditions as may be prescribed; or 

(c) to any persons, if it is authorised by a special resolution, whether or not those persons include 
the persons referred to in clause (a) or clause (b), either for cash or for a consideration other than cash, 
if the price of such shares is determined by the valuation report 2[of a registered valuer, subject to the 
compliance  with  the  applicable  provisions  of  Chapter  III  and  any  other  conditions  as  may  be 
prescribed]. 

3[(2) The notice referred to in sub-clause (i) of clause (a) of sub-section (1) shall be dispatched through 
registered  post  or  speed  post  or  through  electronic  mode  or courier  or any  other  mode  having  proof  of 
delivery to all the existing shareholders at least three days before the opening of the issue.] 

(3) Nothing in this section shall apply to the increase of the subscribed capital of a company caused by 
the  exercise  of an  option  as  a  term  attached to the  debentures issued  or  loan raised  by  the  company  to 
convert such debentures or loans into shares in the company: 

Provided  that  the  terms  of  issue  of  such  debentures  or  loan  containing  such  an  option  have  been 
approved before the issue of such debentures or the raising of loan by a special resolution passed by the 
company in general meeting. 

(4) Notwithstanding anything contained in sub-section (3), where any debentures have been issued, or 
loan has been obtained from any Government by a company, and if that Government considers it necessary 
in the public interest so to do, it may, by order, direct that such debentures or loans or any part thereof shall 
be converted into shares in the company on such terms and conditions as appear to the Government to be 
reasonable in the circumstances of the case even if terms of the issue of such debentures or the raising of 
such loans do not include a term for providing for an option for such conversion: 

Provided that where the terms and conditions of such conversion are not acceptable to the company, it 
may, within sixty days from the date of communication of such order, appeal to the Tribunal which shall 
after hearing the company and the Government pass such order as it deems fit. 

(5) In determining the terms and conditions of conversion under sub-section (4), the Government shall 
have due regard to the financial position of the company, the terms of issue of debentures or loans, as the 
case  may  be,  the  rate  of interest  payable  on such  debentures or loans  and  such other  matters  as  it  may 
consider necessary. 

(6) Where the Government has, by an order made under sub-section (4), directed that any debenture or 
loan or any part thereof shall be converted into shares in a company and where no appeal has been preferred 
to the Tribunal under sub-section (4) or where such appeal has been dismissed, the memorandum of such 

1. Ins. by Act 29 of 2020, s. 11 (w.e.f. 22-1-2021). 
2. Subs. by Act 1 of 2018, s. 14, for “of a registered valuer subject to such conditions as may be prescribed” (w.e.f. 9-2-2018). 
3. Subs. by s. 14, ibid., for sub-section (2) (w.e.f. 9-2-2018). 

54 

 
                                                           
company shall, where such order has the effect of increasing the authorised share capital of the company, 
stand altered and the authorised share capital of such company shall stand increased by an amount equal to 
the amount of the value of shares which such debentures or loans or part thereof has been converted into. 

63. Issue of bonus shares.—(1) 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. 

(2) No company shall capitalise its profits or reserves for the purpose of issuing fully paid-up bonus 

shares under sub-section (1), unless— 

(a) it is authorised by its articles; 

(b)  it  has,  on  the  recommendation  of  the  Board,  been  authorised  in  the  general  meeting  of  the 

company; 

(c)  it  has  not  defaulted  in  payment  of  interest  or  principal  in  respect  of  fixed  deposits  or  debt 

securities issued by it; 

(d)  it  has  not  defaulted  in  respect  of  the  payment  of  statutory  dues  of  the  employees,  such  as, 

contribution to provident fund, gratuity and bonus; 

(e) the partly paid-up shares, if any outstanding on the date of allotment, are made fully paid-up; 

(f) it complies with such conditions as may be prescribed. 

(3) The bonus shares shall not be issued in lieu of dividend. 

64. Notice to be given to Registrar for alteration of share capital.—(1) Where— 

(a) a company alters its share capital in any manner specified in sub-section (1) of section 61; 

(b) an order made by the Government under sub-section (4) read with sub-section (6) of          section 

62 has the effect of increasing authorised capital of a company; or 

(c) a company redeems any redeemable preference shares, 

the company shall file a notice in the prescribed form with the Registrar within a period of thirty days of 
such alteration or increase or redemption, as the case may be, along with an altered memorandum. 

1[(2) where any company fails to comply with the provisions of sub-section (1), such company rupees 
and every officer who is in default shall be liable to a penalty of 2[five hundred rupees] for each day during 
which such default continues,  3[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].] 

65.  Unlimited  company  to  provide  for  reserve  share  capital  on  conversion  into  limited 
company.—An unlimited company having a share capital may, by a resolution for registration as a limited 
company under this Act, do either or both of the following things, namely— 

(a) increase the nominal amount of its share capital by increasing the nominal amount of each of 
its shares, subject to the condition that no part of the increased capital shall be capable of being called 
up except in the event and for the purposes of the company being wound up; 

(b) provide that a specified portion of its uncalled share capital shall not be capable of being called 

up except in the event and for the purposes of the company being wound up. 

1. Subs. by Act 22 of 2019, s. 10, for sub-section (2) (w.e.f. 2-11-2018). 
2. Subs. by  Act 29 of 2020, s. 12, for “one thousand rupees” (w.e.f. 21-12-2020). 
3. Subs. by s. 12, ibid., for “or five lakh rupees whichever is less” (w.e.f. 21-12-2020). 

55 

 
                                                           
66. Reduction of share capital.—(1) Subject to confirmation by the Tribunal on an application by the 
company, a company limited by shares or limited by guarantee and having a share capital may, by a special 
resolution, reduce the share capital in any manner and in particular, may— 

(a)  extinguish  or  reduce  the  liability  on  any  of  its  shares  in  respect  of  the  share  capital  not             

paid-up; or 

(b) either with or without extinguishing or reducing liability on any of its shares,— 

(i) cancel any paid-up share capital which is lost or is unrepresented by available assets; or 

(ii) pay off any paid-up share capital which is in excess of the wants of the company, 

alter its memorandum by reducing the amount of its share capital and of its shares accordingly: 

Provided that no such reduction shall be made if the company is in arrears in the repayment of any 
deposits accepted by it, either before or after the commencement of this Act, or the interest payable thereon. 

(2) The Tribunal shall give notice of every application made to it under sub-section (1) to the Central 
Government, Registrar and to the Securities and Exchange Board, in the case of listed companies, and the 
creditors of the company and shall take into consideration the representations, if any, made to it by that 
Government, Registrar, the Securities and Exchange Board and the creditors within a period of three months 
from the date of receipt of the notice: 

Provided that where no representation has been received from the Central Government, Registrar, the 
Securities and Exchange Board or the creditors within the said period, it shall be presumed that they have 
no objection to the reduction. 

(3) The Tribunal may, if it is satisfied that the debt or claim of every creditor of the company has been 
discharged or determined or has been secured or his consent is obtained, make an order confirming the 
reduction of share capital on such terms and conditions as it deems fit: 

Provided that no application for reduction of share capital shall be sanctioned by the Tribunal unless 
the accounting treatment, proposed by the company for such reduction is in conformity with the accounting 
standards specified in section 133 or any other provision of this Act and a certificate to that effect by the 
company’s auditor has been filed with the Tribunal. 

(4) The order of confirmation of the reduction of share capital by the Tribunal under sub-section (3) 

shall be published by the company in such manner as the Tribunal may direct. 

(5) The company shall deliver a certified copy of the order of the Tribunal under sub-section (3) and of 

a minute approved by the Tribunal showing— 

(a) the amount of share capital; 

(b) the number of shares into which it is to be divided; 
(c) the amount of each share; and 
(d) the amount, if any, at the date of registration deemed to be paid-up on each share, 

to the Registrar within thirty days of the receipt of the copy of the order, who shall register the same and 
issue a certificate to that effect. 

(6) Nothing in this section shall apply to buy-back of its own securities by a company under           section 

68. 

(7) A member of the company, past or present, shall not be liable to any call or contribution in respect 
of any share held by him exceeding the amount of difference, if any, between the amount paid on the share, 
or reduced amount, if any, which is to be deemed to have been paid thereon, as the case may be, and the 
amount of the share as fixed by the order of reduction. 

(8) Where the name of any creditor entitled to object to the reduction of share capital under this section 
is, by reason of his ignorance of the proceedings for reduction or of their nature and effect with respect to 
his debt or claim, not entered on the list of creditors, and after such reduction, the company  1[commits a 

1. Subs. by Act 31 of 2016, s.  255 and the Eleventh Schedule, for “is unable, within the meaning of sub-section (2) of section 271, 

to pay the amount of his debt or claim,” (w.e.f. 15-11-2016). 

56 

 
                                                           
default, within the meaning of section 6 of the Insolvency and Bankruptcy Code, 2016           (31 of 2016), 
in respect of the amount of his debt or claim],— 

(a) every person, who was a member of the company on the date of the registration of the order for 
reduction by the Registrar, shall be liable to contribute to the payment of that debt or claim, an amount 
not  exceeding  the  amount  which  he  would  have  been  liable  to  contribute  if  the  company  had 
commenced winding up on the day immediately before the said date; and 

(b) if the company is wound up, the Tribunal may, on the application of any such creditor and proof 
of his ignorance as aforesaid, if it thinks fit, settle a list of persons so liable to contribute, and make and 
enforce calls and orders on the contributories settled on the list, as if they were ordinary contributories 
in a winding up. 

(9) Nothing in sub-section (8) shall affect the rights of the contributories among themselves. 

(10) If any officer of the company— 

(a) knowingly conceals the name of any creditor entitled to object to the reduction; 

(b) knowingly misrepresents the nature or amount of the debt or claim of any creditor; or 

(c) abets or is privy to any such concealment or misrepresentation as aforesaid, 

he shall be liable under section 447. 

1* 

* 

* 

* 

*. 

67. Restriction on purchase by company or giving of loans by it for purchase of its shares.—(1) 
No company limited by shares or by guarantee and having a share capital shall have power to buy its own 
shares unless the consequent reduction of share capital is effected under the provisions of this Act. 

(2)  No  public  company  shall  give,  whether  directly  or  indirectly  and  whether  by  means  of  a  loan, 
guarantee,  the  provision  of  security  or  otherwise,  any  financial  assistance  for  the  purpose  of,  or  in 
connection with, a purchase or subscription made or to be made, by any person of or for any shares in the 
company or in its holding company. 

(3) Nothing in sub-section (2) shall apply to— 

(a) the lending of money by a banking company in the ordinary course of its business; 

(b) the provision by a company of money in accordance with any scheme approved by company 
through  special  resolution  and  in  accordance  with  such  requirements  as  may  be  prescribed,  for  the 
purchase of, or subscription for, fully paid-up shares in the company or its holding company, if the 
purchase of, or the subscription for, the shares held by trustees for the benefit of the employees or such 
shares held by the employee of the company; 

(c) the giving of loans by a company to persons in the employment of the company 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: 

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. 

(4) Nothing in this section shall affect the right of a company to redeem any preference shares issued 

by it under this Act or under any previous company law. 

(5) If a company contravenes the provisions of this section, it shall be punishable with fine which shall 
not be less than one 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 imprisonment for a term which may extend to three 
years and with fine which shall not be less than one lakh rupees but which may extend to twenty-five lakh 
rupees. 

1. Sub-section (11) omitted by Act 29 of 2020, s. 13 (w.e.f. 21-12-2020). 

57 

 
 
 
 
 
 
 
 
 
                                                           
68. Power of company to purchase its own securities.—(1) Notwithstanding anything contained in 
this Act, but subject to the provisions of sub-section (2), a company may purchase its own shares or other 
specified securities (hereinafter referred to as buy-back) out of— 

(a) its free reserves; 

(b) the securities premium account; or 

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

Provided that no buy-back of any kind of shares or other specified securities shall be made out of the 

proceeds of an earlier issue of the same kind of shares or same kind of other specified securities. 

(2)  No  company  shall  purchase  its  own  shares  or  other  specified  securities  under  sub-section  (1), 

unless— 

(a) the buy-back is authorised by its articles; 

(b)  a  special  resolution  has  been  passed  at  a  general  meeting  of  the  company  authorising  the          

buy-back: 

Provided that nothing contained in this clause shall apply to a case where— 

(i) the buy-back is, ten per cent. or less of the total paid-up equity capital and free reserves of the 

company; and 

(ii) such buy-back has been authorised by the Board by means of a resolution passed at its meeting; 

(c) the buy-back is twenty-five per cent. or less of the aggregate of paid-up capital and free reserves 

of the company: 

Provided that in respect of the buy-back of equity shares in any financial year, the reference to twenty-
five per cent. in this clause shall be construed with respect to its total paid-up equity capital in that financial 
year; 

(d) the ratio of the aggregate of secured and unsecured debts owed by the company after buy-back 

is not more than twice the paid-up capital and its free reserves: 

Provided that the Central Government may, by order, notify a higher ratio of the debt to capital and 

free reserves for a class or classes of companies; 

(e) all the shares or other specified securities for buy-back are fully paid-up; 

(f) the buy-back of the shares or other specified securities listed on any recognized stock exchange 

is in accordance with the regulations made by the Securities and Exchange Board in this behalf; and 

(g) the buy-back in respect of shares or other specified securities other than those specified in clause 

(f) is in accordance with such rules as may be prescribed: 

Provided that no offer of buy-back under this sub-section shall be made within a period of one year 

reckoned from the date of the closure of the preceding offer of buy-back, if any. 

(3) The notice of the meeting at which the special resolution is proposed to be passed under clause (b) 

of sub-section (2) shall be accompanied by an explanatory statement stating— 

(a) a full and complete disclosure of all material facts; 

(b) the necessity for the buy-back; 

(c) the class of shares or securities intended to be purchased under the buy-back; 

(d) the amount to be invested under the buy-back; and 

(e) the time-limit for completion of buy-back. 

(4)  Every  buy-back  shall  be  completed  within  a  period  of  one  year  from  the  date  of  passing  of  the 

special  resolution,  or  as  the  case  may  be,  the  resolution  passed  by  the  Board  under  clause  (b)  of                               
sub-section (2). 

58 

 
(5) The buy-back under sub-section (1) may be— 

(a) from the existing shareholders or security holders on a proportionate basis; 

(b) from the open market; 

(c) by purchasing the securities issued to employees of the company pursuant to a scheme of stock 

option or sweat equity. 

(6)  Where  a  company  proposes  to  buy-back  its  own  shares  or  other  specified  securities  under  this 
section in pursuance of a special resolution under clause (b) of sub-section (2) or a resolution under item 
(ii) of the proviso thereto, it shall, before making such buy-back, file with the Registrar and the Securities 
and  Exchange  Board,  a  declaration  of  solvency  signed  by  atleast  two  directors  of  the  company,  one  of 
whom shall be the managing director, if any, in such form as may be prescribed and verified by an affidavit 
to  the  effect  that the  Board  of  Directors of  the  company  has  made  a  full inquiry  into  the  affairs  of  the 
company as a result of which they have formed an opinion that it is capable of meeting its liabilities and 
will not be rendered insolvent within a period of one year from the date of declaration adopted by the Board: 

Provided that no declaration of solvency shall be filed with the Securities and Exchange Board by a 

company whose shares are not listed on any recognised stock exchange. 

(7) Where a company buys back its own shares or other specified securities, it shall extinguish and 
physically destroy the shares or securities so bought back within seven days of the last date of completion 
of buy-back. 

(8) Where a company completes a buy-back of its shares or other specified securities under this section, 
it shall not make a further issue of the same kind of shares or other securities including allotment of new 
shares under clause (a) of sub-section (1) of section 62 or other specified securities within a period of six 
months except by way of a bonus issue or in the discharge of subsisting obligations such as conversion of 
warrants, stock option schemes, sweat equity or conversion of preference shares or debentures into equity 
shares. 

(9)  Where  a  company  buys  back  its  shares  or  other  specified  securities  under  this  section,  it  shall 
maintain a register of the shares or securities so bought, the consideration paid for the shares or securities 
bought  back,  the  date  of  cancellation  of  shares  or  securities,  the  date  of  extinguishing  and  physically 
destroying the shares or securities and such other particulars as may be prescribed. 

(10) A company shall, after the completion of the buy-back under this section, file with the Registrar 
and the Securities and Exchange Board a return containing such particulars relating to the buy-back within 
thirty days of such completion, as may be prescribed: 

Provided that no return shall be filed with the Securities and Exchange Board by a company whose 

shares are not listed on any recognised stock exchange. 

(11) If a company makes any default in complying with the provisions of this section or any regulation 
made by the Securities and Exchange Board, for the purposes of clause (f) of sub-section (2), the company 
shall be punishable with fine which shall not be less than one lakh rupees but which may extend to three 
lakh rupees and every officer of the company who is in default shall be punishable  1*** with fine which 
shall not be less than one lakh rupees but which may extend to 2[three lakh rupees]. 

Explanation  I.—For  the  purposes  of  this  section  and  section  70,  “specified  securities”  includes 
employees’ stock option or other securities as may be notified by the Central Government from time to 
time. 

Explanation II.—For the purposes of this section, “free reserves” includes securities premium account. 

69.  Transfer  of  certain  sums  to  capital  redemption  reserve  account.—(1)  Where  a  company 
purchases its own shares out of free reserves or securities premium account, a sum equal to the nominal 

1. The words “with imprisonment for a term which may extend to three years or” omitted by Act 29 of 2020, s. 14 (w.e.f. 21-12-

2020). 

2. Subs. by s. 14, ibid., for “three lakh rupees, or with both” (w.e.f. 21-12-2020). 

59 

 
                                                           
value of the shares so purchased shall be transferred to the capital redemption reserve account and details 
of such transfer shall be disclosed in the balance sheet. 

(2) The capital redemption reserve account may be applied by the company, in paying up unissued 

shares of the company to be issued to members of the company as fully paid bonus shares. 

70. Prohibition for buy-back in certain circumstances.—(1) No company shall directly or indirectly 

purchase its own shares or other specified securities— 

(a) through any subsidiary company including its own subsidiary companies; 

(b) through any investment company or group of investment companies; or 

(c) if a default, is made by the company, in the repayment of deposits accepted either before or after 
the commencement of this Act, interest payment thereon, redemption of debentures or preference shares 
or payment of dividend to any shareholder, or re payment of any term loan or interest payable thereon 
to any financial institution or banking company: 

Provided that the buy-back is not prohibited, if the default is remedied and a period of three years 

has lapsed after such default ceased to subsist. 

(2) No company shall, directly or indirectly, purchase its own shares or other specified securities in 

case such company has not complied with the provisions of sections 92, 123,127 and section 129. 

71. Debentures.—(1) A company may issue debentures with an option to convert such debentures into 

shares, either wholly or partly at the time of redemption: 

Provided that the issue of debentures with an option to convert such debentures into shares, wholly or 

partly, shall be approved by a special resolution passed at a general meeting. 

(2) No company shall issue any debentures carrying any voting rights. 

(3) Secured debentures may be issued by a company subject to such terms and conditions as may be 

prescribed. 

(4) Where debentures are issued by a company under this section, the company shall create a debenture 
redemption reserve account out of the profits of the company available for payment of dividend and the 
amount  credited  to  such  account  shall  not  be  utilised  by  the  company  except  for  the  redemption  of 
debentures. 

(5) No company shall issue a prospectus or make an offer or invitation to the public or  to its members 
exceeding five hundred for the subscription of its debentures, unless the company has, before such issue or 
offer,  appointed  one  or  more  debenture  trustees  and  the  conditions  governing  the  appointment  of  such 
trustees shall be such as may be prescribed. 

(6) A debenture trustee shall take steps to protect the interests of the debenture-holders and redress their 

grievances in accordance with such rules as may be prescribed. 

(7) Any provision contained in a trust deed for securing the issue of debentures, or in any contract with 
the debenture-holders secured by a trust deed, shall be void in so far as it would have the effect of exempting 
a trustee thereof from, or indemnifying him against, any liability for breach of trust, where he fails to show 
the degree of care and due diligence required of him as a trustee, having regard to the provisions of the trust 
deed conferring on him any power, authority or discretion: 

Provided that the liability of the debenture trustee shall be subject to such exemptions as may be agreed 
upon by a majority of debenture-holders holding not less than three-fourths in value of the total debentures 
at a meeting held for the purpose. 

(8) A company shall pay interest and redeem the debentures in accordance with the terms and conditions 

of their issue. 

(9) Where at any time the debenture trustee comes to a conclusion that the assets of the company are 
insufficient or are likely to become in sufficient to discharge the principal amount as and when it becomes 
due, the debenture trustee may file a petition before the Tribunal and the Tribunal may, after hearing the 

60 

 
company and any other person interested in the matter, by order, impose such restrictions on the incurring 
of  any  further  liabilities  by  the  company  as  the Tribunal  may  consider  necessary  in  the  interests  of  the 
debenture-holders. 

(10) Where a company fails to redeem the debentures on the date of their maturity or fails to pay interest 
on the debentures when it is due, the Tribunal may, on the application of any or all of the debenture-holders, 
or debenture trustee and, after hearing the parties concerned, direct, by order, the company to redeem the 
debentures forth with on payment of principal and interest due thereon. 

1* 

* 

* 

* 

* 

(12)  A  contract  with  the  company  to  take  up  and  pay  for  any  debentures  of  the  company  may  be 

enforced by a decree for specific performance. 

(13) The Central Government may prescribe the procedure, for securing the issue of debentures, the 
form of debenture trust deed, the procedure for the debenture-holders to inspect the trust deed and to obtain 
copies thereof, quantum of debenture redemption reserve required to be created and such other matters. 

72. Power to nominate.—(1) Every holder of securities of a company may, at any time, nominate, in 

the prescribed manner, any person to whom his securities shall vest in the event of his death. 

(2) Where the securities of a company are held by more than one person jointly, the joint holders may 
together nominate, in the prescribed manner, any person to whom all the rights in the securities shall vest 
in the event of death of all the joint holders. 

(3)  Notwithstanding  anything  contained  in  any  other  law  for  the  time  being  in  force  or  in  any 
disposition,  whether  testamentary  or  otherwise,  in  respect  of  the  securities  of  a  company,  where  a 
nomination made in the prescribed manner purports to confer on any person the right to vest the securities 
of the company, the nominee shall, on the death of the holder of securities or, as the case may be, on the 
death of the joint holders, become entitled to all the rights in the securities, of the holder or, as the case may 
be, of all the joint holders, in relation to such securities, to the exclusion of all other persons, unless the 
nomination is varied or cancelled in the prescribed manner. 

(4)  Where  the  nominee  is  a  minor,  it  shall  be  lawful  for  the  holder  of  the  securities,  making  the 
nomination  to  appoint,  in  the  prescribed  manner,  any  person to  become  entitled  to the securities  of the 
company, in the event of the death of the nominee during his minority. 

CHAPTER V 
ACCEPTANCE OF DEPOSITS BY COMPANIES 

73. Prohibition on acceptance of deposits from public.—(1) On and after the commencement of this 
Act, no company shall invite, accept or renew deposits under this Act from the public except in a manner 
provided under this Chapter: 

Provided that nothing in this sub-section shall apply to a banking company and non-banking financial 
company as defined in the Reserve Bank of India Act, 1934 (2 of 1934) and to such other company as the 
Central Government may, after consultation with the Reserve Bank of India, specify in this behalf. 

(2) A company may, subject to the passing of a resolution in general meeting and subject to such rules 
as may be prescribed in consultation with the Reserve Bank of India, accept deposits from its members on 
such terms and conditions, including the provision of security, if any, or for the repayment of such deposits 
with interest, as may be agreed upon between the company and its members, subject to the fulfilment of the 
following conditions, namely:— 

(a) issuance of a circular to its members including therein a statement showing the financial position 
of the company, the credit rating obtained, the total number of depositors and the amount due towards 
deposits in respect of any previous deposits accepted by the company and such other particulars in such 
form and in such manner as may be prescribed; 

(b) filing a copy of the circular along with such statement with the Registrar within thirty days 

before the date of issue of the circular; 

1. Sub-section (11) omitted by Act 29 of 2020, s. 15 (w.e.f. 21-12-2020). 

61 

 
 
 
 
 
 
 
 
 
                                                           
1[(c) depositing, on or before the thirtieth day of April each year, such sum which shall not be less 
than twenty per cent. of the amount of its deposits maturing during the following financial year and 
kept in a scheduled bank in a separate bank account to be called deposit repayment reserve account;] 

2* 
 (e)  certifying  that  the  company  has  not  committed  any  default  in  the  repayment  of  deposits 

* 

* 

* 

* 

accepted either before or after the commencement of this Act or payment of interest on,  

3[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;] and 

(f) providing security, if any for the due repayment of the amount of deposit or the interest thereon 

including the creation of such charge on the property or assets of the company: 

Provided  that  in  case  where  a  company  does  not  secure  the  deposits  or  secures  such  deposits 
partially, then, the deposits shall be termed as “unsecured deposits” and shall be so quoted in every 
circular, form, advertisement or in any document related to invitation or acceptance of deposits. 
(3)  Every  deposit  accepted  by  a  company  under  sub-section  (2)  shall  be  repaid  with  interest  in 

accordance with the terms and conditions of the agreement referred to in that sub-section. 

(4) Where a company fails to repay the deposit or part thereof or any interest thereon under            sub-
section (3), the depositor concerned may apply to the Tribunal for an order directing the company to pay 
the sum due or for any loss or damage incurred by him as a result of such non-payment and for such other 
orders as the Tribunal may deem fit. 

(5) The deposit repayment reserve account referred to in clause (c) of sub-section (2) shall not be used 

by the company for any purpose other than repayment of deposits. 

74. Repayment of deposits, etc., accepted before commencement of this Act.—(1) Where in respect 
of any deposit accepted by a company before the commencement of this Act, the amount of such deposit 
or part thereof or any interest due thereon remains unpaid on such commencement or becomes due at any 
time thereafter, the company shall— 

(a) file, within a period of three months from such commencement or from the date on which such 
payments, are due, with the Registrar a statement of all the deposits accepted by the company and sums 
remaining unpaid on such amount with the interest payable thereon along with the arrangements made 
for such repayment, notwithstanding anything contained in any other law for the time being in force or 
under the terms and conditions subject to which the deposit was accepted or any scheme framed under 
any law; and 

4[(b) repay within three years from such commencement or on or before expiry of the period for 

which the deposits were accepted, 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.] 
(2) The Tribunal may on an application made by the company, after considering the financial condition 
of  the  company,  the  amount  of  deposit  or  part  thereof  and  the  interest  payable  thereon  and  such  other 
matters, allow further time as considered reasonable to the company to repay the deposit. 

(3)  If  a  company  fails  to  repay  the  deposit  or  part  thereof  or  any  interest  thereon  within  the  time 
specified in sub-section (1) or such further time as may be allowed by the Tribunal under sub-section (2), 
the company shall, in addition to the payment of the amount of deposit or part thereof and the interest due, 
be punishable with fine which shall not be less than one crore rupees but which may extend to ten crore 
rupees and every officer of the company who is in default shall be punishable with imprisonment which 
may extend to seven years or with fine which shall not be less than twenty-five lakh rupees but which may 
extend to two crore rupees, or with both. 

75. Damages for fraud.—(1) Where a company fails to repay the deposit or part thereof or any interest 
thereon referred to in section 74 within the time specified in sub-section (1) of that section or such further 
time  as  may  be  allowed  by  the  Tribunal  under sub-section  (2)  of  that  section, and  it  is  proved  that the 

1. Subs. by Act 1 of 2018, s. 15, for clause (c) (w.e.f. 15-8-2018). 
2. Clause (d) omitted by s. 15, ibid. (w.e.f. 15-8-2018). 
3. Subs. by s. 15, ibid., for “such deposits;” (w.e.f. 15-8-2018).  
4. Subs. by s. 16, ibid., for clause (b) (w.e.f. 15-8-2018). 

62 

 
 
 
 
 
 
 
 
                                                           
deposits had been accepted with intent to defraud the depositors or for any fraudulent purpose, every officer 
of  the  company  who  was  responsible  for the acceptance  of  such  deposit  shall, without  prejudice  to  the 
provisions  contained  in  sub-section  (3)  of  that  section  and  liability  under  section  447,  be  personally 
responsible, without any limitation of liability, for all or any of the losses or damages that may have been 
incurred by the depositors. 

(2)  Any  suit,  proceedings  or  other  action  may  be  taken  by  any  person,  group  of  persons  or  any 
association of persons who had incurred any loss as a result of the failure of the company to repay the 
deposits or part thereof or any interest thereon. 

76.  Acceptance  of  deposits  from  public  by  certain  companies.—(1)  Notwithstanding  anything 
contained in section 73, a public company, having such net worth or turnover as may be prescribed, may 
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 networth, 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. 

(2) The provisions of this Chapter shall, mutatis mutandis, apply to the acceptance of deposits from 

public under this section. 

1[76A. Punishment for contravention of section 73 or section 76.—Where a company accepts or 
invites or allows or causes any other person to accept or invite on its behalf any deposit in contravention of 
the manner or the conditions prescribed under section 73 or section 76 or rules made thereunder or if a 
company fails to repay the deposit or part thereof or any interest due thereon within the time specified under 
section 73 or section 76 or rules made thereunder or such further time as may be allowed by the Tribunal 
under section73,— 

(a) the company shall, in addition to the payment of the amount of deposit or part thereof and the 
interest due, be punishable with fine which shall not be less than 2[one crore rupees or twice the amount 
of deposit accepted by the company, whichever is lower] but which may extend to ten crore rupees; 
and 

(b) every officer of the company who is in default shall be punishable with imprisonment which 
may extend to  3[seven years and with fine] which shall not be less than twenty-five lakh rupees but 
which may extend to two crore rupees, 4***: 
Provided that if it is proved that the officer of the company who is in default, has contravened such 
provisions knowingly or wilfully with the intention to deceive the company or its shareholders or depositors 
or creditors or tax authorities, he shall be liable for action under section 447.] 

CHAPTER VI 
REGISTRATION OF CHARGES 

77. Duty to register charges, etc.—(1) It shall be the duty of every company creating a charge within 
or outside India, on its property or assets or any of its undertakings, whether tangible or otherwise, and 
situated in or outside India, to register the particulars of the charge signed by the company and the charge-
holder together with the instruments, if any, creating such charge in such form, on payment of such fees 
and in such manner as may be prescribed, with the Registrar within thirty days of its creation: 

5[Provided that  the  Registrar  may,  on  an  application  by  the  company,  allow  such  registration to  be 

made— 

(a) in case of charges created before the commencement  of the Companies (Amendment) Act, 

2019, within a period of three hundred days of such creation; or  

1. Ins. by Act 21 of 2015, s. 8 (w.e.f. 29-5-2015).  
2. Subs. by Act 1 of 2018, s. 17, for “one crore rupees” (w.e.f. 9-2-2018). 
3. Subs. by s. 17, ibid., for “seven years or with fine” (w.e.f. 9-2-2018). 
4. The words “or with both” omitted by s. 17, ibid. (w.e.f. 9-2-2018). 
5. Subs. by Act 22 of 2019, s. 11, for first and second provisos (w.e.f. 2-11-2018). 

63 

 
                                                           
(b) in case of charges created on or after the commencement of the Companies (Amendment) Act, 

2019, within a period of sixty days of such creation,  
on payment of such additional fees as may be prescribed: 

Provided further that if the registration is not made within the period specified— 

(a) in clause (a) to the first proviso, the registration of the charges shall be made within six months 
from  the  date  of  commencement  of  the  Companies  (Amendment)  Act,  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  ad  valorem  fees  as  may  be 
prescribed.] 
Provided also  that any  subsequent registration  of  a charge  shall  not  prejudice  any  right  acquired in 

respect of any property before the charge is actually registered: 

1[Provided also that this section shall not apply to such charges as may be prescribed in consultation 

with the Reserve Bank of India.] 

(2) Where a charge is registered with the Registrar under sub-section (1), he shall issue a certificate of 
registration of such charge in such form and in such manner as may be prescribed to the company and, as 
the case may be, to the person in whose favour the charge is created. 

(3) Notwithstanding anything contained in any other law for the time being in force, no charge created 
by a company shall be taken into account by the liquidator 2[appointed under this Act or the Insolvency and 
Bankruptcy Code, 2016 (31 of 2016), as the case may be,] or any other creditor unless it is duly registered 
under sub-section (1) and a certificate of registration of such charge is given by the Registrar under sub-
section (2). 

(4) Nothing in sub-section (3) shall prejudice any contract or obligation for the repayment of the money 

secured by a charge. 

78. Application for registration of charge.—Where a company fails to 3[register the charge within 
the period of thirty days referred to in sub-section (1) of section 77] without prejudice to  its liability in 
respect of any offence under this Chapter, the person in whose favour the charge is created may apply to 
the Registrar for registration of the charge along with the instrument created for the charge, within such 
time and in such form and manner as may be prescribed and the Registrar may, on such application, within 
a period of fourteen days after giving notice to the company, unless the company itself registers the charge 
or shows sufficient cause why such charge should not be registered, allow such registration on payment of 
such fees, as may be prescribed: 

Provided that where registration is effected on application of the person in whose favour the charge is 
created, that person shall be entitled to recover from the company the amount of any fees or additional fees 
paid by him to the Registrar for the purpose of registration of charge. 

79. Section 77 to apply in certain matters.—The provisions of section 77 relating to registration of 

charges shall, so far as may be, apply to— 

(a) a company acquiring any property subject to a charge within the meaning of that section; or 
(b) any modification in the terms or conditions or the extent or operation of any charge registered 

under that section. 
80. Date of notice of charge.—Where any charge on any property or assets of a company or any of its 
undertakings is registered under section 77, 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. 

81.  Register  of  charges  to  be  kept  by  Registrar.—(1)  The  Registrar  shall,  in  respect  of  every 
company, keep a register containing particulars of the charges registered under this Chapter in such form 
and in such manner as may be prescribed. 

1. The proviso ins. by Act 1 of 2018, s. 18 (w.e.f. 7-5-2018).  
2. Ins. by Act 31 of 2016, s. 255 and the Eleventh Schedule (w.e.f. 15-11-2016). 
3. Subs. by Act 1 of 2018, s. 19, for “register the charge within the period specified in section 77” (w.e.f. 7-5-2018). 

64 

 
                                                           
(2) A register kept in pursuance of this section shall be open to inspection by any person on payment 

of such fees as may be prescribed for each inspection. 

82. Company to report satisfaction of charge.—(1) A company shall give intimation to the Registrar 
in the prescribed form, of the payment or satisfaction in full of any charge registered under this Chapter 
within a period of thirty days from the date of such payment or satisfaction 1***. 

2[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.] 

(2) The Registrar shall, on receipt of intimation under sub-section (1), cause a notice to be sent to the 
holder of the charge calling upon him to show cause within such time not exceeding fourteen days, as may 
be specified in such notice, as to why payment or satisfaction in full should not be recorded as intimated to 
the  Registrar,  and  if  no  cause  is  shown,  by  such  holder  of  the  charge,  the  Registrar  shall  order  that  a 
memorandum of satisfaction shall be entered in the register of charges kept by him under section 81 and 
shall inform the company that he has done so: 

Provided  that  the  notice  referred  to  in  this  sub-section  shall  not  be  required  to  be  sent,  in  case  the 

intimation to the Registrar in this regard is in the specified form and signed by the holder of charge. 

(3) If any cause is shown, the Registrar shall record a note to that effect in the register of charges and 

shall inform the company. 

(4) Nothing in this section shall be deemed to affect the powers of the Registrar to make an entry in the 

register of charges under section 83 or otherwise than on receipt of an intimation from the company. 

83. Power of Registrar to make entries of satisfaction and release in absence of intimation from 
company.—(1)  The  Registrar  may,  on  evidence  being  given  to  his  satisfaction  with  respect  to  any 
registered charge,— 

(a) that the debt for which the charge was given has been paid or satisfied in whole or in part; or 
(b) that 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, 

enter in the register of charges a memorandum of satisfaction in whole or in part, or of the fact that 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, as the case may be, notwithstanding the fact that no intimation has been received 
by him from the company. 

(2) The Registrar shall inform the affected parties within thirty days of making the entry in the register 

of charges kept under sub-section (1) of section 81. 

84. Intimation of appointment of receiver or manager.—(1) If any person obtains an order for the 
appointment of a receiver of, or of a person to manage, the property, subject to a charge, of a company or 
if any person appoints such receiver or person under any power contained in any instrument, he shall, within 
a period of thirty days from the date of the passing of the order or of the making of the appointment, give 
notice of such appointment to the company and the Registrar along with a copy of the order or instrument 
and the Registrar shall, on payment of the prescribed fees, register particulars of the receiver, person or 
instrument in the register of charges. 

(2) Any person appointed under sub-section (1) shall, on ceasing to hold such appointment, give to the 

company and the Registrar a notice to that effect and the Registrar shall register such notice. 

85. Company’s register of charges.—(1) Every company shall keep at its registered office a register 
of charges in such form and in such manner as may be prescribed, which shall include there in all charges 
and floating charges affecting any property or assets of the company or any of its undertakings, indicating 
in each case such particulars as may be prescribed: 

Provided that a copy of the instrument creating the charge shall also be kept at the registered office of 

the company along with the register of charges. 

1. Omitted by Act 1 of 2018, s. 20, for certain words (w.e.f. 5-7-2018). 
2. The Proviso ins. by s. 20, ibid. (w.e.f. 5-7-2018). 

65 

 
                                                           
(2) The register  of  charges  and  instrument  of  charges,  kept  under  sub-section  (1)  shall  be  open for 

inspection during business hours— 

(a) by any member or creditor without any payment of fees; or 

(b) by any other person on payment of such fees as may be prescribed, 

subject to such reasonable restrictions as the company may, by its articles, impose. 

86. Punishment for contravention.—1[ 2[(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]. 

3[(2) If any person willfully 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.] 

4[87. Rectification by Central Government in Register of charges.—The Central Government on 

being satisfied that— 

(a) the omission to give intimate to the Registrar of the payment or satisfaction of a charge, within 

the time required under this Chapter; or 

(b) the omission or misstatement of any particulars, in any filing previously made to 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, 

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.] 

CHAPTER VII 

MANAGEMENT AND ADMINISTRATION 

88. Register of members, etc.—(1) Every company shall keep and maintain the following registers in 

such form and in such manner as may be prescribed, namely:— 

(a) register of members indicating separately for each class of equity and preference shares held by 

each member residing in or outside India; 

(b) register of debenture-holders; and 

(c) register of any other security holders. 

(2) Every register maintained under sub-section (1) shall include an index of the names included therein. 

(3) The register and index of beneficial owners maintained by a depository under section 11 of the 
Depositories Act, 1996 (22 of 1996), shall be deemed to be the corresponding register and index for the 
purposes of this Act. 

(4) A company may, if so authorised by its articles, keep in any country outside India, in such manner 
as may be prescribed, a part of the register referred to in sub-section (1), called “foreign register” containing 
the names and particulars of the members, debenture-holders, other security holders or beneficial owners 
residing outside India. 

5[(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 

1. Subs. by Act 29 of 2020, s. 16, for sub-section (1) (w.e.f. 21-12-2020). 
2. Section 86 numbered as sub-section (1) thereof by Act 22 of 2019, s.12 (w.e.f. 2-11-2018). 
3. Ins. by s. 12, ibid. (w.e.f. 2-11-2018). 
4. Subs. by s. 13, ibid., for section 86 (w.e.f. 2-11-2018). 
5. Subs. by Act 29 of 2020, s. 17, for sub-section (5) (w.e.f. 21-12-2020). 

66 

 
                                                           
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.] 

89. Declaration in respect of beneficial interest in any share.—(1) Where the name of a person is 
entered in the register of members of a company as the holder of shares in that company but who does not 
hold the beneficial interest in such shares, such person shall make a declaration within such time and in 
such form as may be prescribed to the company specifying the name and other particulars of the person 
who holds the beneficial interest in such shares. 

(2)  Every  person  who  holds  or  acquires  a  beneficial  interest  in  share  of  a  company  shall  make  a 
declaration to the company specifying the nature of his interest, particulars of the person in whose name 
the shares stand registered in the books of the company and such other particulars as may be prescribed. 

(3) Where any change occurs in the beneficial interest in such shares, the person referred to in        sub-
section (1) and the beneficial owner specified in sub-section (2) shall, within a period of thirty days from 
the date of such change, make a declaration to the company in such form and containing such particulars 
as may be prescribed. 

(4)  The  Central  Government  may  make  rules  to  provide  for  the  manner  of  holding  and  disclosing 

beneficial interest and beneficial ownership under this section. 

1[(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.] 

(6) Where any declaration under this section is made to a company, the company shall make a note of 
such  declaration  in  the  register  concerned  and  shall  file,  within  thirty  days  from  the  date  of  receipt  of 
declaration by it, a return in the prescribed form with the Registrar in respect of such declaration with such 
fees or additional fees as may be prescribed, 2***. 

3[(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.] 

(8) No right in relation to any share in respect of which a declaration is required to be made under this 
section but not made by the beneficial owner, shall be enforceable by him or by any person claiming through 
him. 

(9) Nothing in this section shall be deemed to prejudice the obligation of a company to pay dividend to 

its members under this Act and the said obligation shall, on such payment, stand discharged. 

4[(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.] 

5[(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.] 

6[90.  Register  of  significant  beneficial  owners  in  a  company.—(1)  Every  individual,  who  acting 
alone or together, or through one or more persons or trust, including a trust and persons resident outside 
India, holds beneficial interests, of 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 

1. Subs. by Act 29 of 2020, s. 18, for sub-section (5) (w.e.f. 21-12-2020). 
2. The words and figures “within the time specified under section 403” omitted by Act 1 of 2018, s. 21 (w.e.f. 7-5-2018).  
3. Subs. by Act 29 of 2020, s. 18, for sub-section (7) (w.e.f. 21-12-2020). 
4. Ins. by Act 1 of 2018, s. 21, (w.e.f. 13-6-2018). 
5. Ins. by Act 29 of 2020, s. 18 (w.e.f. 22-1-2021). 
6. Subs. by Act 1 of 2018, s. 22, for section 90  (w.e.f. 13-6-2018). 

67 

 
                                                           
 
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.  

1[(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.] 

(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.  

2[(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), within a period of one year 
from the date of such order: 

Provided that if no such application has been filed within a period of one year from the date of the 
order  under  sub-section  (8),  such  shares  shall  be  transferred,  without  any  restrictions,  to  the  authority 
constituted under sub-section (5) of section 125, in such manner as may be prescribed;] 
3[(9A) The Central Government may make rules for the purposes of this section.] 
4[(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 

1. Ins. by Act 22 of 2019, s. 14 (w.e.f. 15-8-2019). 
2. Subs. by Act 22 of 2019,  s. 14, for sub-section (9) (w.e.f. 2-11-2018). 
3. Ins. by s. 14, ibid. (w.e.f. 15-8-2019). 
4. Subs.by Act 29 of 2020, s. 19, for sub-section (10) (w.e.f. 21-12-2020). 

68 

 
                                                           
rupees for each day after the first during which such failure continues, subject to a maximum of two lakh 
rupees.] 

1[(11) If a company, required to maintain register under sub-section (2) and file the information under 
sub-section  (4)  2[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 rupees 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.]  

(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.] 

91. Power to close register of members or debenture-holders or other security holders.—(1) A 
company may close the register of members or the register of debenture-holders or the register of other 
security holders for any period or periods not exceeding in the aggregate forty-five days in each year, but 
not exceeding thirty days at any one time, subject to giving of previous notice of at least seven days or such 
lesser period as may be specified by Securities and Exchange Board for listed companies or the companies 
which intend to get their securities listed, in such manner as may be prescribed. 

(2) If the register of members or of debenture-holders or of other security holders is closed without 
giving the notice as provided in sub-section (1), or after giving shorter notice than that so provided, or for 
a continuous or an aggregate period in excess of the limits specified in that sub-section, the company and 
every officer of the company who is in default shall be liable to a penalty of five thousand rupees for every 
day subject to a maximum of one lakh rupees during which the register is kept closed. 

92. Annual return.—(1) Every company shall prepare a return (hereinafter referred to as the annual 
return) in the prescribed form containing  the particulars as they stood on the close of the financial year 
regarding— 

(a)  its  registered  office,  principal  business  activities,  particulars  of  its  holding,  subsidiary  and 

associate companies; 

(b) its shares, debentures and other securities and shareholding pattern; 
2* 
(d) its members and debenture-holders along with changes therein since the close of the previous 

* 

* 

* 

* 

financial year; 

(e) its promoters, directors, key managerial personnel along with changes there in since the close 

of the previous financial year; 

(f) meetings of members or a class thereof, Board and its various committees along with attendance 

details; 

(g) remuneration of directors and key managerial personnel; 
(h)  penalty  or  punishment  imposed  on  the  company,  its  directors  or  officers  and  details  of 

compounding of offences and appeals made against such penalty or punishment; 

(i) matters relating to certification of compliances, disclosures as may be prescribed; 
(j) details, as may be prescribed, in respect of shares held by or on behalf of the Foreign Institutional 

Investors 3***; and 

(k) such other matters as may be prescribed, 

and signed by a director and the company secretary, or where there is no company secretary, by a company 
secretary in practice: 

Provided that in relation to One Person Company and small company, the annual return shall be signed 

by the company secretary, or where there is no company secretary, by the director of the company. 

1. Subs. by Act 29 of 2020, s. 19, for sub-section (11) (w.e.f. 21-12-2020). 
2. Clause (c) omitted by Act 1 of 2018, s. 23 (w.e.f. 5-3-2021). 
3. The words “indicating their names, addresses, countries of incorporation, registration and percentage of shareholding held by 

them” omitted by s. 23, ibid (w.e.f. 5-3-2021). 

69 

 
 
 
 
 
 
 
 
                                                           
1[Provided  further  that  the  Central  Government  may  prescribe  abridged  form  of  annual  return  for  “One 

Person Company, small company and such other class of classes of companies as may be prescribed”.] 

(2) 2[The annual return, filed by a listed company or, by a company having such paid-up capital or turnover 
as may be prescribed] shall be certified by a company secretary in practice in the prescribed form, stating that 
the annual return discloses the facts correctly and adequately and that the company has complied with all the 
provisions of this Act. 

(3) An extract of the annual return in such form as may be prescribed shall form part of the Board’s report. 
(4) 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, with such fees or additional fees as may be 
prescribed, 3***. 

4[(5)  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  5[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  6[two  lakh  rupees  in  case  of  a 
company and fifty thousand rupees in case of an officer who is an default].] 

(6)  If  a  company  secretary  in  practice  certifies  the  annual  return  otherwise  than  in  conformity  with  the 

requirements of this section or the rules made thereunder, he shall be 7[liable to a penalty of two lakh rupees]. 

93. [Return to be filed with Registrar in case promoter’s stake changes.] Omitted by the Companies Act, 

2017 (1 of 2018), s. 24 (w.e.f. 13-6-2018). 

94. Place of keeping and inspection of registers, returns, etc.—(1) The registers required to be kept and 
maintained by a company under section 88 and copies of the annual return filed under section 92 shall be kept 
at the registered office of the company: 

Provided that such registers or copies of return may also be kept at any other place in India in which more 

than one-tenth of the total number of members entered in the register of members reside, if approved by a 
special resolution passed at a general meeting of the company 8***: 

Provided further that the period for which the registers, returns and records are required to be kept shall be 

such as may be prescribed. 

(2) The registers and their indices, except when they are closed under the provisions of this Act, and the 
copies of all the returns shall be open for inspection by any member, debenture-holder, other security holder or 
beneficial owner, during business hours without payment of any fees and by any other person on payment of 
such fees as may be prescribed. 

(3)  Any  such  member,  debenture-holder,  other  security  holder  or  beneficial  owner  or  any  other  person 

may— 

(a) take extracts from any register, or index or return without payment of any fee; or 
(b) require a copy of any such register or entries therein or return on payment of such fees as may be 

prescribed. 

9[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.]. 

1. Ins. by Act 1 of 2018, s. 23 (w.e.f. 5-3-2021). 
2. Subs. by S.O. 1177 (E), dated 29th April, 2014 for certain words (w.e.f. 29-4-2014).   
3. The words “within the time as specified, under section 403” omitted by Act 1 of 2018, s. 23 (w.e.f. 7-5-2018).   
4. Subs. by Act 22 of 2019, s. 15, for sub-section (5) (w.e.f. 2-11-2018). 
5. Subs. by Act 29 of 2020, s. 20, for “fifty thousand rupees” (w.e.f. 21-12-2020). 
6. Subs. by s. 20, ibid., for “five lakh rupees” (w.e.f. 21-12-2020). 
7. Subs. by s. 20, ibid., for “punishable with fine which shall not be less than fifty thousand rupees but which may extend to five 

lakh rupees” (w.e.f. 21-12-2020). 

8. The words “and the Registrar has been given a copy of the proposed special resolution in advance” omitted by Act 1 of 2018, s. 

25 (w.e.f. 13-6-2018). 

9. The proviso ins. by Act 1 of 2018, s. 25 (w.e.f. 13-6-2018).  

70 

 
 
 
                                                           
(4) If any inspection or the making of any extract or copy required under this section is refused, the 
company and every officer of the company who is in default shall be liable, for each such default, to a 
penalty of one thousand rupees for every day subject to a maximum of one lakh rupees during which the 
refusal or default continues. 

(5) The Central Government may also, by order, direct an immediate inspection of the document, or 

direct that the extract required shall forthwith be allowed to be taken by the person requiring it. 

95.  Registers,  etc.,  to  be  evidence.—The  registers,  their  indices  and  copies  of  annual  returns 
maintained under sections 88 and 94 shall be prima facie evidence of any matter directed or authorised to 
be inserted therein by or under this Act. 

96. Annual general meeting.—(1) Every company other than a One Person Company shall in each 
year hold in addition to any other meetings, a general meeting as its annual general meeting and shall specify 
the meeting as such in the notices calling it, and not more than fifteen months shall elapse between the date 
of one annual general meeting of a company and that of the next: 

Provided that in case of the first annual general meeting, it shall be held within a period of nine months 
from the date of closing of the first financial year of the company and in any other case, within a period of 
six months, from the date of closing of the financial year: 

Provided further that 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: 

Provided also 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. 

(2) 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 at some other place within the city, town or village in which the registered office of the company is 
situate: 

1[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] the Central Government may exempt any company from the provisions of this 

sub-section subject to such conditions as it may impose. 

Explanation.—For  the  purposes  of  this  sub-section,  “National  Holiday”  means  and  includes  a  day 

declared as National Holiday by the Central Government. 

97. Power of Tribunal to call annual general meeting.—(1) If any default is made in holding the 
annual  general  meeting  of  a  company  under  section  96,  the  Tribunal  may,  notwithstanding  anything 
contained in this Act or the articles of the company, on the application of any member of the company, call, 
or direct the calling of, an annual general meeting of the company and give such ancillary or consequential 
directions as the Tribunal thinks expedient: 

Provided that such directions may include a direction that one member of the company present in person 

or by proxy shall be deemed to constitute a meeting. 

(2)  A  general  meeting  held  in  pursuance  of  sub-section  (1)  shall,  subject  to  any  directions  of  the 

Tribunal, be deemed to be an annual general meeting of the company under this Act. 

98. Power of Tribunal to call meetings of members, etc.—(1) If for any reason it is impracticable to 
call a meeting of a company, other than an annual general meeting, in any manner in which meetings of the 
company may be called, or to hold or conduct the meeting of the company in the manner prescribed by this 
Act or the articles of the company, the Tribunal may, either suo motu or on the application of any director 
or member of the company who would be entitled to vote at the meeting,— 

(a) order a meeting of the company to be called, held and conducted in such manner as the Tribunal 

thinks fit; and 

1. Subs. by Act 1 of 2018, s. 26, for “Provided that” (w.e.f. 13-6-2018).  

71 

 
                                                           
(b)  give  such  ancillary  or  consequential  directions  as  the  Tribunal  thinks  expedient,  including 
directions modifying or supplementing in relation to the calling, holding and conducting of the meeting, 
the operation of the provisions of this Act or articles of the company: 
Provided that such directions may include a direction that one member of the company present in person 

or by proxy shall be deemed to constitute a meeting. 

(2) Any meeting called, held and conducted in accordance with any order made under sub-section (1) 

shall, for all purposes, be deemed to be a meeting of the company duly called, held and conducted. 

99. Punishment for default in complying with provisions of sections 96 to 98.—If any default is 
made in holding a meeting of the company in accordance with section 96 or section 97 or section 98 or in 
complying with any directions of the Tribunal, 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. 

100. Calling of extraordinary general meeting.—(1) The Board may, whenever it deems fit, call an 

extraordinary general meeting of the company. 

1[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.] 

(2) The Board shall, at the requisition made by,— 

(a) in the case of a company having a share capital, such number of members who hold, on the date 
of  the  receipt  of  the  requisition,  not  less  than  one-tenth  of  such  of  the  paid-up  share  capital  of  the 
company as on that date carries the right of voting; 

(b) in the case of a company not having a share capital, such number of members who have, on the 
date of receipt of the requisition, not less than one-tenth of the total voting power of all the members 
having on the said date a right to vote, 

call an extraordinary general meeting of the company within the period specified in sub-section (4). 

(3) The requisition made under sub-section (2) shall set out the matters for the consideration of which 
the meeting is to be called and shall be signed by the requisitionists and sent to the registered office of the 
company. 

(4) If the Board does not, within twenty-one days from the date of receipt of a valid requisition in regard 
to any matter, proceed to call a meeting for the consideration of that matter on a day not later than forty-
five  days  from  the  date  of  receipt  of  such  requisition,  the  meeting  may  be  called  and  held  by  the 
requisitionists themselves within a period of three months from the date of the requisition. 

(5) A meeting under sub-section (4) by the requisitionists shall be called and held in the same manner 

in which the meeting is called and held by the Board. 

(6) Any reasonable expenses incurred by the requisitionists in calling a meeting under sub-section (4) 
shall be reimbursed to the requisitionists by the company and the sums so paid shall be deducted from any 
fee or other remuneration under section 197 payable to such of the directors who were in default in calling 
the meeting. 

101. Notice of meeting.—(1) 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  maybe 
prescribed: 

2[Provided that a general meeting may be called after giving shorter notice than that specified in this 

sub-section if consent, in writing or by electronic mode, is accorded thereto— 

(i) in the case of an annual general meeting, by not less than ninty-five per cent. of the members 

entitled to vote thereat; and 

(ii) in the case of any other general meeting, by members of the company— 

1. The proviso ins. by Act 1 of  2018, s. 27 (w.e.f. 9-2-2018). 
2. The proviso subs. by Act 1 of  2018, s. 28 (w.e.f. 9-2-2018). 

72 

 
                                                           
(a) holding, if the company has a share capital, majority in number of members 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 ninty-five per cent. of the total voting 

power exercisable at that meeting: 

Provided further that where any member of a company is entitled to vote only on some resolution or resolutions 
to be moved at a meeting and not on the others, those members shall be taken into account for the purposes of this 
sub-section in respect of the former resolution or resolutions and not in respect of the latter.] 

(2) Every notice of a meeting shall specify the place, date, day and the hour of the meeting and shall 

contain a statement of the business to be transacted at such meeting. 

(3) The notice of every meeting of the company shall be given to— 

(a) every member of the company, legal representative of any deceased member or the assignee of 

an insolvent member; 

(b) the auditor or auditors of the company; and 

(c) every director of the company. 

(4) Any accidental omission to give notice to, or the non-receipt of such notice by, any member or other 

person who is entitled to such notice for any meeting shall not invalidate the proceedings of the meeting. 

102. Statement to be annexed to notice.—(1) A statement setting out the following material facts 
concerning each item of special business to be transacted at a general meeting, shall be annexed to the 
notice calling such meeting, namely:— 

(a) the nature of concern or interest, financial or otherwise, if any, in respect of each items of— 

(i) every director and the manager, if any; 

(ii) every other key managerial personnel; and 

(iii) relatives of the persons mentioned in sub-clauses (i) and (ii); 

(b) any other information and facts that may enable members to understand the meaning, scope and 

implications of the items of business and to take decision thereon. 

(2) For the purposes of sub-section (1),— 

(a) in the case of an annual general meeting, all business to be transacted thereat shall be deemed 

special, other than— 

(i)  the  consideration  of  financial  statements  and  the  reports  of  the  Board  of  Directors  and 

auditors; 

(ii) the declaration of any dividend; 

(iii) the appointment of directors in place of those retiring; 

(iv) the appointment of, and the fixing of the remuneration of, the auditors; and 

(b) in the case of any other meeting, all business shall be deemed to be special: 

Provided that where any item of special business to be transacted at a meeting of the company relates 
to or affects any other company, the extent of shareholding interest in that other company of every promoter, 
director, manager, if any, and of every other key managerial personnel of the first mentioned company shall, 
if the extent of such shareholding is not less than two per cent. of the paid-up share capital of that company, 
also be set out in the statement. 

73 

 
(3) Where any item of business refers to any document, which is to be considered at the meeting, the 
time and place where such document can be inspected shall be specified in the statement under                   sub-
section (1). 

(4) Where as a result of the non-disclosure or insufficient disclosure in any statement referred to in sub-
section (1), being made by a promoter, director, manager, if any, or other key managerial personnel, any 
benefit  which  accrues  to  such  promoter,  director,  manager  or  other  key  managerial  personnel  or  their 
relatives, either directly or indirectly, the promoter, director, manager or other key managerial personnel, 
as the case may be, shall hold such benefit in trust for the company, and shall, without prejudice to any 
other action being taken against him under this Act or under any other law for the time being in force, be 
liable to compensate the company to the extent of the benefit received by him. 

1[(5) Without prejudice to the provisions of sub-section (4), if any default is made in complying with 
the provisions of this section, every promoter, director, manager or other key managerial personnel of the 
company who is in default shall be liable to a penalty of fifty thousand rupees or five times the amount of 
benefit accruing to the promoter, director, manager or other key managerial personnel or any of his relatives, 
whichever is higher.] 

103. Quorum for meetings.—(1) Unless the articles of the company provide for a larger number,— 

(a) in case of a public company,— 

(i) five members personally present if the number of members as on the date of meeting is not 

more than one thousand; 

(ii) fifteen members personally present if the number of members as on the date of meeting is 

more than one thousand but up to five thousand; 

(iii) thirty members personally present if the number of members as on the date of the meeting 

exceeds five thousand; 

(b) in the case of a private company, two members personally present, shall be the quorum for a 

meeting of the company. 

(2) If the quorum is not present within half-an-hour from the time appointed for holding a meeting of 

the company— 

(a) the meeting shall stand adjourned to the same day in the next week at the same time and place, 

or to such other date and such other time and place as the Board may determine; or 

(b) the meeting, if called by requisitionists under section 100, shall stand cancelled: 

Provided that in case of an adjourned meeting or of a change of day, time or place of meeting under 
clause (a), the company shall give not less than three days notice to the members either individually or by 
publishing an advertisement 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. 

(3) If at the adjourned meeting also, a quorum is not present within half-an-hour from the time appointed 

for holding meeting, the members present shall be the quorum. 

104. Chairman of meetings.—(1) Unless the articles of the company otherwise provide, the members 
personally present at the meeting shall elect one of themselves to be the Chairman thereof on a show of 
hands. 

(2) If a poll is demanded on the election of the Chairman, it shall be taken forthwith in accordance with 
the provisions of this Act and the Chairman elected on a show of hands under sub-section (1) shall continue 
to be the Chairman of the meeting until some other person is elected as Chairman as a result of the poll, 
and such other person shall be the Chairman for the rest of the meeting. 

1. Subs.  by Act 22 of 2019, s. 16, for sub-section (5) (w.e.f. 2-11-2018). 

74 

 
                                                           
105. Proxies.—(1) Any member of a company entitled to attend and vote at a meeting of the company 

shall be entitled to appoint another person as a proxy to attend and vote at the meeting on his behalf: 

Provided that a proxy shall not have the right to speak at such meeting and shall not been titled to vote 

except on a poll: 

Provided further that, unless the articles of a company otherwise provide, this sub-section shall not 

apply in the case of a company not having a share capital: 

Provided  also  that  the  Central  Government  may  prescribe  a  class  or  classes  of  companies  whose 

members shall not be entitled to appoint another person as a proxy: 

Provided  also  that  a  person  appointed  as  proxy  shall  act  on  behalf  of  such  member  or  number  of 

members not exceeding fifty and such number of shares as may be prescribed. 

(2) In every notice calling a meeting of a company which has a share capital, or the articles of which 
provide for voting by proxy at the meeting, there shall appear with reasonable prominence a statement that 
a member entitled to attend and vote is entitled to appoint a proxy, or, where that is allowed, one or more 
proxies, to attend and vote instead of himself, and that a proxy need not be a member. 

(3) If default is made in complying with sub-section (2), every officer of the company who is in default 

shall be 1[liable to a penalty of five thousands rupees]. 

(4) Any provision contained in the articles of a company which specifies or requires a longer period 
than  forty-eight  hours  before  a  meeting  of  the  company,  for  depositing  with  the  company  or  any  other 
person any instrument appointing a proxy or any other document necessary to show the validity or otherwise 
relating to the appointment of a proxy in order that the appointment may be effective at such meeting, shall 
have effect as if a period of forty-eight hours had been specified in or required by such provision for such 
deposit. 

(5) 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 2[who 
issues the invitation as aforesaid or authorises or permits their issue, shall be liable to a penalty of fifty 
thousand rupees]: 

Provided that an officer shall not be  3[liable] 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. 

(6) The instrument appointing a proxy shall— 

(a) be in writing; and 

(b) be signed by the appointer or his attorney duly authorised in writing or, if the appointer is a 

body corporate, be under its seal or be signed by an officer or an attorney duly authorised by it. 

(7) An instrument appointing a proxy, if in the form as may be prescribed, shall not be questioned on 
the ground that it fails to comply with any special requirements specified for such instrument by the articles 
of a company. 

(8)  Every  member  entitled  to  vote  at a  meeting  of  the  company,  or  on  any  resolution  to  be  moved 
thereat,  shall  be  entitled  during  the  period  beginning  twenty-four  hours  before  the  time  fixed  for  the 
commencement of the meeting and ending with the conclusion of the meeting, to inspect the proxies lodged, 
at any time during the business hours of the company, provided not less than three days’ notice in writing 
of the intention so to inspect is given to the company. 

1. Subs. by Act 22 of 2019, s. 17, for “punishable with fine which may extend to five thousand rupees” (w.e.f. 2-11-2018). 
2. Subs. by Act 29 of 2020, s. 21, for certain words (w.e.f. 21-12-2020). 
3. Subs. by s. 21, ibid., for “punishable” (w.e.f. 21-12-2020). 

75 

 
                                                           
106. Restriction on voting rights.—(1) Notwithstanding anything contained in this Act, 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. 

(2) A company shall not, except on the grounds specified in sub-section (1), prohibit any member from 

exercising his voting right on any other ground. 

(3) On a poll taken at a meeting of a company, a member entitled to more than one vote, or his proxy, 
where allowed, or other person entitled to vote for him, as the case may be, need not, if he votes, use all his 
votes or cast in the same way all the votes he uses. 

107. Voting by show of hands.—(1) At any general meeting, a resolution put to the vote of the meeting 
shall, unless a poll is demanded under section 109 or the voting is carried out electronically, be decided on 
a show of hands. 

(2) A declaration by the Chairman of the meeting of the passing of a resolution or otherwise by show 
of hands under sub-section (1) and an entry to that effect in the books containing the minutes of the meeting 
of the company shall be conclusive evidence of the fact of passing of such resolution or otherwise. 

108. Voting through electronic means.—The Central Government may prescribe the class or classes 

of companies and manner in which a member may exercise his right to vote by the electronic means. 

109. Demand for poll.—(1) 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. 

(2) The demand for a poll may be withdrawn at any time by the persons who made the demand. 

(3) A poll demanded for adjournment of the meeting or appointment of Chairman of the meeting shall 

be taken forthwith. 

(4)  A  poll  demanded  on  any  question  other  than  adjournment  of  the  meeting  or  appointment  of 
Chairman shall be taken at such time, not being later than forty-eight hours from the time when the demand 
was made, as the Chairman of the meeting may direct. 

(5) Where a poll is to be taken, the Chairman of the meeting shall appoint such number of persons, as 
he deems necessary, to scrutinise the poll process and votes given on the poll and to report thereon to him 
in the manner as may be prescribed. 

(6) Subject to the provisions of this section, the Chairman of the meeting shall have power to regulate 

the manner in which the poll shall be taken. 

(7) The result of the poll shall be deemed to be the decision of the meeting on the resolution on which 

the poll was taken. 

110. Postal ballot.—(1) Notwithstanding anything contained in this Act, a company— 

(a)  shall,  in  respect  of  such  items  of  business  as  the  Central  Government  may,  by  notification, 

declare to be transacted only by means of postal ballot; and 

(b) may, in respect of any item of business, other than ordinary business and any business in respect 
of which directors or auditors have a right to be heard at any meeting, transact by means of postal ballot, 

in such manner as may be prescribed, instead of transacting such business at a general meeting: 

76 

 
1[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.] 

(2) If a resolution is assented to by the requisite majority of the shareholders by means of postal ballot, 

it shall be deemed to have been duly passed at a general meeting convened in that behalf. 

111. Circulation of members’ resolution.—(1) A company shall, on requisition in writing of such 

number of members, as required in section 100,— 

(a) give notice to members of any resolution which may properly be moved and is intended to be 

moved at a meeting; and 

(b) circulate to members any statement with respect to the matters referred to in proposed resolution 

or business to be dealt with at that meeting. 

(2) A company shall not be bound under this section to give notice of any resolution or to circulate any 

statement unless— 

(a) a copy of the requisition signed by the requisitionists (or two or more copies which, between 
them,  contain  the  signatures  of  all  the  requisitionists)  is  deposited  at  the  registered  office  of  the 
company,— 

(i) in the case of a requisition requiring notice of a resolution, not less than six weeks before 

the meeting; 

(ii) in the case of any other requisition, not less than two weeks before the meeting; and 

(b)  there  is  deposited  or  tendered  with  the  requisition,  a  sum  reasonably  sufficient  to  meet  the 

company’s expenses in giving effect thereto: 

Provided that if, after a copy of a requisition requiring notice of a resolution has been deposited at the 
registered office of the company, an annual general meeting is called on a date within six weeks after the 
copy has been deposited, the copy, although not deposited within the time required by this sub-section, 
shall be deemed to have been properly deposited for the purposes thereof. 

(3) The company shall not be bound to circulate any statement as required by clause (b) of              sub-
section (1), if on the application either of the company or of any other person who claims to be aggrieved, 
the Central Government, by order, declares that the rights conferred by this section are being abused to 
secure needless publicity for defamatory matter. 

(4) An order made under sub-section (3) may also direct that the cost incurred by the company by virtue 
of this section shall be paid to the company by the requisitionists, notwithstanding that they are not parties 
to the application. 

(5) If any default is made in complying with the provisions of this section, the company and every 

officer of the company who is in default shall be liable to a penalty of twenty-five thousand rupees. 

112. Representation of President and Governors in meetings.—(1) The President of India or the 
Governor of a State, if he is a member of a company, may appoint such person as he thinks fit to act as his 
representative at any meeting of the company or at any meeting of any class of members of the company. 

(2) A person appointed to act under sub-section (1) shall, for the purposes of this Act, be deemed to be 
a member of such a company and shall be entitled to exercise the same rights and powers, including the 
right to vote by proxy and postal ballot, as the President or, as the case may be, the Governor could exercise 
as a member of the company. 

113.  Representation  of  corporations  at  meeting  of  companies  and  of  creditors.—(1)  A  body 

corporate, whether a company within the meaning of this Act or not, may, — 

1. The Proviso ins. by Act 1 of 2018, s. 29 (w.e.f. 9-2-2018). 

77 

 
                                                           
(a) if it is a member of a company within the meaning of this Act, by resolution of its Board of 
Directors or other governing body, authorise such person as it thinks fit to act as its representative at 
any meeting of the company, or at any meeting of any class of members of the company; 

(b) if it is a creditor, including a holder of debentures, of a company within the meaning of this Act, 
by resolution of its directors or other governing body, authorise such person as it thinks fit to act as its 
representative at any meeting of any creditors of the company held in pursuance of this Act or of any 
rules made thereunder, or in pursuance of the provisions contained in any debenture or trust deed, as 
the case may be. 
(2) A person authorised by resolution under sub-section (1) shall be entitled to exercise the same rights 
and powers, including the right to vote by proxy and by postal ballot, on behalf of the body corporate which 
he represents as that body could exercise if it were an individual member, creditor or holder of debentures 
of the company. 

114. Ordinary and special resolutions.—(1) A resolution shall be an ordinary resolution if the notice 
required under this Act has been duly given and it is required to be passed by the votes cast, whether on a 
show of hands, or electronically or on a poll, as the case may be, in favour of the resolution, including the 
casting vote, if any, of the Chairman, by members who, being entitled so to do, vote in person, or where 
proxies are allowed, by proxy or by postal ballot, exceed the votes, if any, cast against the resolution by 
members, so entitled and voting. 

(2) A resolution shall be a special resolution when— 

(a) the intention to propose the resolution as a special resolution has been duly specified in the 

notice calling the general meeting or other intimation given to the members of the resolution; 

(b) the notice required under this Act has been duly given; and 
(c) the votes cast in favour of the resolution, whether on a show of hands, or electronically or on a 
poll, as the case may be, by members who, being entitled so to do, vote in person or by proxy or by 
postal ballot, are required to be not less than three times the number of the votes, if any, cast against 
the resolution by members so entitled and voting. 
115. Resolutions requiring special notice.—Where, by any provision contained in this Act or in the 
articles of a company, special notice is required of any resolution, notice of the intention to move such 
resolution shall be given to the company by such number of members holding not less than one per cent. of 
total voting power or holding shares on which such aggregate sum not exceeding five lakh rupees, as may 
be prescribed, has been paid-up and the company shall give its members notice of the resolution in such 
manner as may be prescribed. 

116.  Resolutions  passed  at  adjourned  meeting.—Where  a  resolution  is  passed  at  an  adjourned 

meeting of— 

(a) a company; or 
(b) the holders of any class of shares in a company; or 
(c) the Board of Directors of a company, 

the resolution shall, for all purposes, be treated as having been passed on the date on which it was in fact 
passed, and shall not be deemed to have been passed on any earlier date. 

117. Resolutions and agreements to be filed.—(1) A copy of every resolution or any agreement, in 
respect of matters specified in sub-section (3) together with the explanatory statement under section 102, if 
any, annexed to the notice calling the meeting in which the resolution is proposed, shall be filed with the 
Registrar within thirty days of the passing or making thereof in such manner and with such fees as may be 
prescribed 1***: 

Provided that the copy of every resolution which has the effect of altering the articles and the copy of 
every agreement referred to in sub-section (3) shall be embodied in or annexed to every copy of the articles 
issued after passing of the resolution or making of the agreement. 

2[(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 

1. The words and figures “within the time specified under section 403” omitted by Act 1 of 2018, s. 30 (w.e.f. 7-5-2018). 
2. Subs. by Act 29 of 2020, s. 22, for sub-section (2) (w.e.f. 21-12-2020). 

78 

 
                                                           
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 further penalty of one hundred rupees for each day after the 
first during which such failure continues, subject to a maximum of fifty thousand rupees.] 

(3) The provisions of this section shall apply to— 

(a) special resolutions; 
(b) resolutions which have been agreed to by all the members of a company, but which, if not so 
agreed  to,  would  not  have  been  effective  for  their  purpose  unless  they  had  been  passed  as  special 
resolutions; 

(c) any resolution of the Board of Directors of a company or agreement executed by a company, 
relating to the appointment, re-appointment or renewal of the appointment, or variation of the terms of 
appointment, of a managing director; 

(d) resolutions or agreements which have been agreed to by any class of members but which, if not 
so agreed to, would not have been effective for their purpose unless they had been passed by a specified 
majority or otherwise in some particular manner; and all resolutions or agreements which effectively 
bind such class of members though not agreed to by all those members; 
* 

1* 
(f) resolutions requiring a company to be wound up voluntarily passed in pursuance of 2[section 59 

* 

* 

* 

of the Insolvency and Bankruptcy Code, 2016 (31 of 2016)]; 

(g) resolutions passed in pursuance of sub-section (3) of section 179:3*** 

4[Provided that no person shall be entitled under section 399 to inspect or obtain copies of such 

resolutions; 5***] 
6[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 (2 of 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 (53 of 1987), as may be prescribed in consultation with the National Housing Bank; and] 

(h) any other resolution or agreement as may be prescribed and placed in the public domain. 

118. Minutes of proceedings of general meeting, meeting of Board of Directors and other meeting 
and resolutions passed by postal ballot.—(1) Every company shall cause minutes of the proceedings of 
every general meeting of any class of shareholders or creditors, and every resolution passed by postal ballot 
and every meeting of its Board of Directors or of every committee of the Board, to be prepared and signed 
in such manner as may be prescribed and kept within thirty days of the conclusion of every such meeting 
concerned,  or  passing  of  resolution  by  postal  ballot  in  books  kept  for  that  purpose  with  their  pages 
consecutively numbered. 

(2) The minutes of each meeting shall contain a fair and correct summary of the proceedings thereat. 
(3) All appointments made at any of the meetings aforesaid shall be included in the minutes of the 

meeting. 

(4) In the case of a meeting of the Board of Directors or of a committee of the Board, the minutes shall 

also contain— 

1.Clause (e) omitted by Act 1 of 2018, s. 30 (w.e.f. 7-5-2018).   
2. Subs. by Act 31 of 2016, s. 255 and the Eleventh Schedule, for “section 304” (w.e.f. 15-11-2016). 
3. The word “and” omitted by Act 21 of 2015, s. 9 (w.e.f. 29-5-2015). 
4. Ins. by s. 9, ibid. (w.e.f. 29-5-2015). 
5. The “and” omitted by Act 1 of 2018, s. 30 (w.e.f. 7-5-2018). 
6.The proviso subs. by Act 29 of 2020, s. 22 (w.e.f. 22-1-2021). 

79 

 
 
 
 
 
 
 
 
                                                           
(a) the names of the directors present at the meeting; and 
(b) in the case of each resolution passed at the meeting, the names of the directors, 

if any, dissenting from, or not concurring with the resolution. 

(5) There shall not be included in the minutes, any matter which, in the opinion of the Chairman of the 

meeting,— 

(a) is or could reasonably be regarded as defamatory of any person; or 
(b) is irrelevant or immaterial to the proceedings; or 
(c) is detrimental to the interests of the company. 

(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). 

(7)  The  minutes  kept  in  accordance  with  the  provisions  of  this  section  shall  be  evidence  of  the 

proceedings recorded therein. 

(8) Where the minutes have been kept in accordance with sub-section (1) then, until the contrary is 
proved, the meeting shall be deemed to have been duly called and held, and all proceedings thereat to have 
duly taken place, and the resolutions passed by postal ballot to have been duly passed and in particular, all 
appointments of directors, key managerial personnel, auditors or company secretary in practice, shall be 
deemed to be valid. 

(9) No document purporting to be a report of the proceedings of any general meeting of a company 
shall be circulated or advertised at the expense of the company, unless it includes the matters required by 
this section to be contained in the minutes of the proceedings of such meeting. 

(10) Every company shall observe secretarial standards with respect to general and Board meetings 
specified  by  the  Institute  of  Company  Secretaries  of  India  constituted  under  section  3  of  the  Company 
Secretaries Act, 1980 (56 of 1980), and approved as such by the Central Government. 

(11) If any default is made in complying with the provisions of this section in respect of any meeting, 
the company shall be liable to a penalty of twenty-five thousand rupees and every officer of the company 
who is in default shall be liable to a penalty of five thousand rupees. 

(12) If a person is found guilty of tampering with the minutes of the proceedings of meeting, he shall 
be punishable with imprisonment for a term which may extend to two years and with fine which shall not 
be less than twenty-five thousand rupees but which may extend to one lakh rupees. 

119. Inspection of minute-books of general meeting.—(1) The books containing the minutes of the 

proceedings of any general meeting of a company or of a resolution passed by postal ballot, shall— 

(a) be kept at the registered office of the company; and 

(b) be open, during business hours, to the inspection by any member without charge, subject to 
such  reasonable  restrictions  as  the  company  may,  by  its  articles  or  in  general  meeting,  impose,  so, 
however, that not less than two hours in each business day are allowed for inspection. 

(2) Any member shall be entitled to be furnished, within seven working days after he has made a request 
in that behalf to the company, and on payment of such fees as may be prescribed, with a copy of any minutes 
referred to in sub-section (1). 

(3) If any inspection under sub-section (1) is refused, or if any copy required under sub-section (2) is 
not  furnished  within the  time  specified therein,  the  company  shall  be liable  to a  penalty  of twenty-five 
thousand  rupees  and  every  officer  of the  company  who  is in  default  shall  be liable  to  a  penalty  of  five 
thousand rupees for each such refusal or default, as the case may be. 

(4) In the case of any such refusal or default, the Tribunal may, without prejudice to any action being 
taken under sub-section (3), by order, direct an immediate inspection of the minute-books or direct that the 
copy required shall forthwith be sent to the person requiring it. 

120. Maintenance and inspection of documents in electronic form.—Without prejudice to any other 

provisions of this Act, any document, record, register, minutes, etc.,— 

80 

 
(a) required to be kept by a company; or 

(b) allowed to be inspected or copies to be given to any person by a company under this Act, may 
be kept or inspected or copies given, as the case may be, in electronic form in such form and manner 
as may be prescribed. 

121.  Report  on  annual  general  meeting.—(1)  Every  listed  public  company  shall  prepare  in  the 
prescribed manner 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 this Act and the rules made thereunder. 

(2) The company shall file with the Registrar a copy of the report referred to in sub-section (1) within 
thirty days of the conclusion of the annual general meeting with such fees as may be prescribed, or with 
such additional fees as may be prescribed, 1***. 

2[(3) If the company fails to file the report under sub-section (2) 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 
a 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 and every officer of the company who is in default shall be liable 
to a penalty which shall not be less than twenty-five thousand 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 one lakh rupees.] 

122. Applicability of this Chapter to One Person Company.—(1) The provisions of section 98 and 

sections 100 to 111 (both inclusive) shall not apply to a One Person Company. 

(2) The ordinary businesses as mentioned under clause (a) of sub-section (2) of section 102 which a 
company, other than a One Person Company, is required to transact at its annual general meeting, shall be 
transacted, in case of One Person Company, as provided in sub-section (3). 

(3) For the purposes of section 114, any business which is required to be transacted at an annual general 
meeting or other general meeting of a company by means of an ordinary or special resolution, it shall be 
sufficient  if,  in  case  of  One  Person  Company,  the  resolution  is  communicated  by  the  member  to  the 
company and entered in the minutes-book required to be maintained under section 118 and signed and dated 
by the member and such date shall be deemed to be the date of the meeting for all the purposes under this 
Act. 

(4) Notwithstanding anything in this Act, where there is only one director on the Board of Director of 
a One Person Company, any business which is required to be transacted at the meeting of the Board of 
Directors of a company, it shall be sufficient if, in case of such One Person Company, the resolution by 
such director is entered in the minutes-book required to be maintained under section 118 and signed and 
dated by such director and such date shall be deemed to be the date of the meeting of the Board of Directors 
for all the purposes under this Act. 

CHAPTER VIII 

DECLARATION AND PAYMENT OF DIVIDEND 

123.  Declaration  of  dividend.—(1)  No  dividend  shall  be  declared  or  paid  by  a  company  for  any 

financial year except— 

(a) out of the profits of the company for that year arrived at after providing for depreciation in 
accordance with the provisions of sub-section (2), or out of the profits of the company for any previous 
financial year or years arrived at after providing for depreciation in accordance with the provisions of 
that sub-section and remaining undistributed, or out of 3[both:] 

1. The words and figures “within the time as specified, under section 403” omitted by Act 1 of 2018, s. 31 (w.e.f. 7-5-2018).  
2. Subs. by Act 22 of 2019, s. 19, for sub-section (3) (w.e.f. 2-11-2018). 
3. Subs. by Act 1 of 2018, s. 32, for “both; or” (w.e.f. 9-2-2018). 

81 

 
                                                           
1[Provided  that  in  computing  profits  any  amount  representing  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] 

(b) out of money provided by the Central Government or a State Government for the payment of 

dividend by the company in pursuance of a guarantee given by that Government: 

Provided that a company may, before the declaration of any dividend in any financial year, transfer 
such percentage of its profits for that financial year as it may consider appropriate to the reserves of the 
company: 

Provided  further  that  where,  owing  to  inadequacy  or  absence  of  profits  in  any  financial  year,  any 
company proposes to declare dividend out of the accumulated profits earned by it in previous  years and 
2[transferred by the company to the free reserves], such declaration of dividend shall not be made except in 
accordance with such rules as may be prescribed in this behalf: 

Provided also that no dividend shall be declared or paid by a company from its reserves other than free 

reserves: 

3[Provided  also  that  no  company  shall  declare  dividend  unless  carried  over  previous  losses  and 
depreciation not provided in previous year or years are set off against profit of the company for the current 
year.] 

(2) For the purposes of clause (a) of sub-section (1), depreciation shall be provided in accordance with 

the provisions of Schedule II. 

4[(3) The Board of Directors of a company may declare interim dividend during any financial year or 
at any time during the period from closure of financial year till holding of the annual general meeting out 
of the surplus in the profit and loss account or out of profits of the financial year for which such interim 
dividend is sought to be declared or out of 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.] 

(4) The amount of the dividend, including interim dividend, shall be deposited in a scheduled bank in 

a separate account within five days from the date of declaration of such dividend. 

(5) No dividend shall be paid by a company in respect of any share therein except to the registered 

shareholder of such share or to his order or to his banker and shall not be payable except in cash: 

Provided that nothing in this sub-section shall be deemed to prohibit the capitalisation of profits or 
reserves of a company for the purpose of issuing fully paid-up bonus shares or paying up any amount for 
the time being unpaid on any shares held by the members of the company: 

Provided  further  that  any  dividend  payable  in  cash  may  be  paid  by  cheque  or  warrant  or  in  any 

electronic mode to the shareholder entitled to the payment of the dividend. 

(6) A company which fails to comply with the provisions of sections 73 and 74 shall not, so long as 

such failure continues, declare any dividend on its equity shares. 

124. Unpaid Dividend Account.—(1) Where a dividend has been declared by a company but has not 
been paid or claimed within thirty days from the date of the declaration to any shareholder entitled to the 
payment of the dividend, the company shall, within seven days from the date of expiry of the said period 
of thirty days, transfer the total amount of dividend which remains unpaid or unclaimed to a special account 

1. The proviso ins. by Act 1 of 2018, s. 32 (w.e.f. 9-2-2018). 
2. Subs. by s. 32, ibid., for “transferred by the company to the reserves” (w.e.f. 9-2-2018). 
3. The Proviso ins. by Act 21 of 2015, s. 10 (w.e.f. 29-5-2015). 
4. Subs. by Act 1 of 2018, s. 32, for sub-section (3) (w.e.f. 9-2-2018). 

82 

 
                                                           
to  be  opened  by  the  company  in  that  behalf  in  any  scheduled  bank  to  be  called  the  Unpaid  Dividend 
Account. 

(2) The company shall, within a period of ninety days of making any transfer of an amount under  sub-
section (1) to the Unpaid Dividend Account, 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 website of the company, if 
any, and also on any other website approved by the Central Government for this purpose, in such form, 
manner and other particulars as may be prescribed. 

(3) If any default is made in transferring the total amount referred  to in sub-section (1) or any part 
thereof to the Unpaid Dividend Account of the company, it shall pay, from the date of such default, interest 
on so much of the amount as has not been transferred to the said account, at the rate of twelve          per 
cent. per annum and the interest accruing on such amount shall ensure to the benefit of the members of the 
company in proportion to the amount remaining unpaid to them. 

(4) Any person claiming to be entitled to any money transferred under sub-section (1) to the Unpaid 

Dividend Account of the company may apply to the company for payment of the money claimed. 

(5) Any money transferred to the Unpaid Dividend Account of a company in pursuance of this section 
which remains  unpaid  or  unclaimed  for a  period  of  seven  years  from  the  date of  such  transfer  shall  be 
transferred  by  the  company  along  with  interest  accrued,  if  any,  thereon  to  the  Fund  established  under         
sub-section (1) of section 125 and the company shall send a statement in the prescribed form of the details 
of such transfer to the authority which administers the said Fund and that authority shall issue a receipt to 
the company as evidence of such transfer. 

(6) All shares in respect of which1[dividend has not been paid or claimed for seven consecutive years 
or more shall be] transferred by the company in the name of Investor Education and Protection Fund along 
with a statement containing such details as may be prescribed: 

Provided that any claimant of shares transferred above shall be entitled to claim the transfer of shares 
from Investor Education and Protection Fund in accordance with such procedure and on submission of such 
documents as may be prescribed. 

2[Explanation.— For the removal of doubts, it is hereby clarified that in case any dividend is paid or 
claimed for any year during the said period of seven consecutive years, the share shall not be transferred to 
Investor Education and Protection Fund.] 

 3[(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.] 

125. Investor Education and Protection Fund.—(1) The Central Government shall establish a Fund 

to be called the Investor Education and Protection Fund (herein referred to as the Fund). 

(2) There shall be credited to the Fund— 

(a) the amount given by the Central Government by way of grants after due appropriation made by 

Parliament by law in this behalf for being utilised for the purposes of the Fund; 

(b) donations given to the Fund by the Central Government, State Governments, companies or any 

other institution for the purposes of the Fund; 

(c) the amount in the Unpaid Dividend Account of companies transferred to the Fund under    sub-

section (5) of section 124; 

(d)  the  amount  in  the  general  revenue  account  of  the  Central  Government  which  had  been 
transferred to that account under sub-section (5) of section 205A of the Companies Act, 1956            (1 

1. Subs. by Act 21 of 2015, s. 11, for “unpaid or unclaimed dividend has been transferred under sub-section (5) shall also be” 

(w.e.f. 29-5-2015). 

2.  The Explanation ins. by s. 11, ibid. (w.e.f. 29-5-2015). 

3. Subs. by vide Notification No. S.O. 1303(E), for sub-section (7) (w.e.f. 24-3-2021). 

83 

 
                                                           
 
of 1956), as it stood immediately before the commencement of the Companies (Amendment) Act, 1999 
(21 of 1999), and remaining unpaid or unclaimed on the commencement of this Act; 

(e)  the  amount  lying  in  the  Investor  Education  and  Protection  Fund  under  section  205C  of  the 

Companies Act, 1956 (1 of 1956); 

(f) the interest or other income received out of investments made from the Fund; 

(g) the amount received under sub-section (4) of section 38; 

(h) the application money received by companies for allotment of any securities and due for refund; 

(i) matured deposits with companies other than banking companies; 

(j) matured debentures with companies; 

(k) interest accrued on the amounts referred to in clauses (h) to (j); 

(l)  sale  proceeds  of  fractional  shares  arising  out  of  issuance  of  bonus  shares,  merger  and 

amalgamation for seven or more years; 

(m)  redemption amount  of  preference shares  remaining  unpaid  or  unclaimed  for  seven  or  more 

years; and 

(n) such other amount as may be prescribed: 

Provided that no such amount referred to in clauses (h) to (j) shall form part of the Fund unless such 
amount has remained unclaimed and unpaid for a period of seven years from the date it became due for 
payment. 

(3) The Fund shall be utilised for— 

(a)  the  refund  in  respect  of  unclaimed  dividends,  matured  deposits,  matured  debentures,  the 

application money due for refund and interest thereon; 

(b) promotion of investors’ education, awareness and protection; 

(c) distribution of any disgorged amount among eligible and identifiable applicants for shares or 
debentures,  shareholders,  debenture-holders  or  depositors  who  have  suffered  losses  due  to  wrong 
actions  by  any  person,  in  accordance  with  the  orders  made  by  the  Court  which  had  ordered 
disgorgement; 

(d) reimbursement of legal expenses incurred in pursuing class action suits under sections 37 and 

245 by members, debenture-holders or depositors as may be sanctioned by the Tribunal; and 

(e) any other purpose incidental thereto, 

in accordance with such rules as may be prescribed: 

Provided that the person whose amounts referred to in clauses (a) to (d) of sub-section (2) of section 
205C transferred to Investor Education and Protection Fund, after the expiry of the period of seven years 
as per provisions of the Companies Act, 1956 (1 of 1956), shall be entitled to get refund out of the Fund in 
respect of such claims in accordance with rules made under this section. 

Explanation.—The disgorged amount refers to the amount received through disgorgement or disposal 

of securities. 

(4)  Any  person  claiming  to  be  entitled  to  the  amount  referred  in  sub-section  (2)  may  apply  to  the 

authority constituted under sub-section (5) for the payment of the money claimed. 

(5) The Central Government shall constitute, by notification, an authority for administration of the Fund 
consisting of a chairperson and such other members, not exceeding seven and a chief executive officer, as 
the Central Government may appoint. 

(6)  The  manner  of  administration  of  the  Fund,  appointment  of  chairperson,  members  and  chief 
executive officer, holding of meetings of the authority shall be in accordance with such rules as may be 
prescribed. 

84 

 
 
 
(7) The Central Government may provide to the authority such offices, officers, employees and other 

resources in accordance with such rules as may be prescribed. 

(8) The authority shall administer the Fund and maintain separate accounts and other relevant records 
in  relation  to  the  Fund  in  such  form  as  may  be  prescribed  after  consultation  with  the  Comptroller  and 
Auditor-General of India. 

(9) It shall be competent for the authority constituted under sub-section (5) to spend money out of the 

Fund for carrying out the objects specified in sub-section (3). 

(10) The accounts of the Fund shall be audited by the Comptroller and Auditor-General of India at such 
intervals as may be specified by him and such audited accounts together with the audit report thereon shall 
be forwarded annually by the authority to the Central Government. 

(11)  The  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. 

126. Right to dividend, rights shares and bonus shares to be held in abeyance pending registration 
of transfer of shares.—Where any instrument of transfer of shares has been delivered to any company for 
registration and the transfer of such shares has not been registered by the company, it shall, notwithstanding 
anything contained in any other provision of this Act,— 

(a) transfer the dividend in relation to such shares to the Unpaid Dividend Account referred to in 
section 124 unless the company is authorised by the registered holder of such shares in writing to pay 
such dividend to the transferee specified in such instrument of transfer; and 

(b)  keep  in  abeyance  in  relation  to  such  shares,  any  offer  of  rights  shares  under  clause  (a)  of              

sub-section (1) of section 62 and any issue of fully paid-up bonus shares in pursuance of first proviso 
to sub-section (5) of section 123. 

127.  Punishment  for  failure  to  distribute  dividends.—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 thirty days from 
the date of declaration to any shareholder entitled to the payment of the dividend, every director of the 
company shall, if he is knowingly a party to the default, be punishable with imprisonment which may extend 
to two years and with fine which shall not be less than one thousand rupees for every day during which 
such default continues and the company shall be liable to pay simple interest at the rate of eighteen per cent. 
per annum during the period for which such default continues: 

Provided that no offence under this section shall be deemed to have been committed:— 

(a) where the dividend could not be paid by reason of the operation of any law; 

(b) where a shareholder has given directions to the company regarding the payment of the dividend 

and those directions cannot be complied with and the same has been communicated to him; 

(c) where there is a dispute regarding the right to receive the dividend; 

(d) where the dividend has been lawfully adjusted by the company against any sum due to it from 

the shareholder; or 

(e) where, for any other reason, the failure to pay the dividend or to post the warrant within the 

period under this section was not due to any default on the part of the company. 

CHAPTER IX 

ACCOUNTS OF COMPANIES 

128. Books of account, etc., to be kept by company.—(1) Every company shall prepare and keep at 
its registered office books of account and other relevant books and papers and financial statement for every 
financial year which give a true and fair view of the state of the affairs of the company, including that of its 
branch office or offices, if any, and explain the transactions effected both at the registered office and its 

85 

 
branches  and  such  books  shall  be  kept  on  accrual  basis  and  according  to  the  double  entry  system  of 
accounting: 

Provided that all or any of the books of account aforesaid and other relevant papers may be kept at such 
other place in India as the Board of Directors may decide and where such a decision is taken, the company 
shall, within seven days thereof, file with the Registrar a notice in writing giving the full address of that 
other place: 

Provided  further  that  the  company  may  keep  such  books  of  account  or  other  relevant  papers  in 

electronic mode in such manner as may be prescribed. 

(2) Where a company has a branch office in India or outside India, it shall be deemed to have complied 
with the provisions of sub-section (1), if proper books of account relating to the transactions effected at the 
branch office are kept at that office and proper summarized returns periodically are sent by the branch office 
to the company at its registered office or the other place referred to in sub-section (1). 

(3) The books of account and other books and papers maintained by the company within India shall be 
open for inspection at the registered office of the company or at such other place in India by any director 
during  business  hours,  and  in  the  case  of financial  information,  if  any,  maintained  outside the  country, 
copies of such financial information shall be maintained and produced for inspection by any director subject 
to such conditions as may be prescribed: 

Provided that the inspection in respect of any subsidiary of the company shall be done only by the 

person authorised in this behalf by a resolution of the Board of Directors. 

(4) Where an inspection is made under sub-section (3), the officers and other employees of the company 
shall give to the person making such inspection all assistance in connection with the inspection which the 
company may reasonably be expected to give. 

(5) The books of account of every company relating to a period of not less than eight financial years 
immediately preceding a financial year, or where the company had been inexistence for a period less than 
eight years, in respect of all the preceding years together with the vouchers relevant to any entry in such 
books of account shall be kept in good order: 

Provided that where an investigation has been ordered in respect of the company under Chapter XIV, 
the Central Government may direct that the books of account may be kept for such longer period as it may 
deem fit. 

(6) If the managing director, the whole-time director in charge of finance, the Chief Financial Officer 
or any other person of a company charged by the Board with the duty of complying with the provisions of 
this section, contravenes such provisions, such managing director, whole-time director in charge of finance, 
Chief Financial Officer or such other person of the company shall be punishable 1*** with fine which shall 
not be less than fifty thousand rupees but which may extend to five lakh rupees 2***. 

129. Financial statement.—(1) The financial statements shall give a true and fair view of the state of 
affairs of the company or companies, comply with the accounting standards notified under section133 and 
shall  be  in  the  form  or  forms  as  may  be  provided  for  different  class  or  classes  of  companies  in               
Schedule III: 

Provided  that  the  items  contained  in  such  financial  statements  shall  be  in  accordance  with  the 

accounting standards: 

Provided  further  that  nothing  contained  in  this  sub-section  shall  apply  to  any  insurance  or  banking 
company  or  any  company  engaged  in  the  generation  or  supply  of  electricity,  or  to  any  other  class  of 
company for which a form of financial statement has been specified in or under the Act governing such 
class of company: 

1. The words “with imprisonment for a term which may extend to one year or” omitted by Act 29 of 2020, s. 24 (w.e.f. 21-21-

2020). 

2. The words “or with both” omitted by s. 24, ibid. (w.e.f. 21-12-2020). 

86 

 
                                                           
Provided also that the financial statements shall not be treated as not disclosing a true and fair view of 

the state of affairs of the company, merely by reason of the fact that they do not disclose— 

(a) in the case of an insurance company, any matters which are not required to be disclosed by the 
Insurance Act, 1938 (4 of 1938), or the Insurance Regulatory and Development Authority Act, 1999 
(41 of 1999); 

(b) in the case of a banking company, any matters which are not required to be disclosed by the 

Banking Regulation Act, 1949 (10 of 1949); 

(c) in the case of a company engaged in the generation or supply of electricity, any matters which 

are not required to be disclosed by the Electricity Act, 2003 (36 of 2003); 

(d) in the case of a company governed by any other law for the time being in force, any matters 

which are not required to be disclosed by that law. 

(2) At every annual general meeting of a company, the Board of Directors of the company shall lay 

before such meeting financial statements for the financial year. 

1[(3) Where a company has one or more subsidiaries or associate companies, it shall, in addition to 
financial  statements  provided  under  sub-section  (2),  prepare  a  consolidated  financial  statement  of  the 
company and of all the subsidiaries and associate companies in the same form and manner as that of its 
own and in accordance with applicable accounting standards, which shall also be laid before the annual 
general meeting of the company along with the laying of its financial statement under sub-section (2): 

 Provided that the company shall 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.] 

 (4)  The  provisions  of  this  Act  applicable  to  the  preparation,  adoption  and  audit  of  the  financial 
statements of a holding company shall, mutatis mutandis, apply to the consolidated financial statements 
referred to in sub-section (3). 

(5) Without prejudice to sub-section (1), where the financial statements of a company do not comply 
with  the  accounting  standards  referred  to  in  sub-section  (1),  the  company  shall  disclose  in  its  financial 
statements, the deviation from the accounting standards, the reasons for such deviation and the financial 
effects, if any, arising out of such deviation. 

(6) The Central Government may, on its own or on an application by a class or classes of companies, 
by notification, exempt any class or classes of companies from complying with any of the requirements of 
this section or the rules made thereunder, 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. 

(7)  If  a  company  contravenes  the  provisions  of  this  section,  the  managing  director,  the  whole-time 
director in charge of finance, the Chief Financial Officer or any other person charged by the Board with the 
duty of complying with the requirements of this section and in the absence of any of the officers mentioned 
above, all the directors shall 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 
with both. 

Explanation.—For  the  purposes  of  this  section,  except  where  the  context  otherwise  requires,  any 
reference to the financial statement shall include any notes annexed to or forming part of such financial 
statement, giving information required to be given and allowed to be given in the form of such notes under 
this Act. 

1. Subs. by Act 1 of 2018, s. 33, for sub-section (3) (w.e.f. 7-5-2018).  

87 

 
                                                           
1[129A. Periodical financial results.—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.] 
130. Re-opening of accounts on court’s or Tribunal’s orders.—(1) 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 
regulatory  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, casting a doubt on the 

reliability of financial statements: 

Provided  that  the  court  or  the  Tribunal,  as  the  case  may  be,  shall  give  notice  to  the  Central 
Government,  the  Income-tax  authorities,  the  Securities  and  Exchange  Board  or  any  other  statutory 
regulatory  body  or  authority  concerned  2[or  any  other  person  concerned]  and  shall  take  into 
consideration the representations, if any, made by that Government or the authorities, Securities and 
Exchange Board or the body or authority concerned 2[or the other person concerned] before passing any 
order under this section. 

(2) Without prejudice to the provisions contained in this Act the accounts so revised or re-cast under 

sub-section (1) shall be final. 

3[(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.] 

131. Voluntary revision of financial statements or Board’s report.—(1) 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: 

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: 

Provided further that such revised financial statement or report shall not be prepared or filed more than 

once in a financial year: 

1. Ins. by Act 29 of 2020, s. 25 (w.e.f. 22-1-2021). 
2. Ins. by Act 1 of 2018, s. 34 (w.e.f. 9-2-2018). 
3. Ins. by s. 34,  ibid. (w.e.f. 9-2-2018). 

88 

 
                                                           
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)  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)  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. 

132. Constitution of National Financial Reporting Authority.—(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. 

1[(1A) The National Financial Reporting Authority shall perform its functions through such divisions 

as may be prescribed.] 

(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. 

1. Ins. by Act 22 of 2019, s. 20 (w.e.f. 15-8-2019). 

89 

 
                                                           
1[(3A)  Each  division  of  the  National  Financial  Reporting  Authority  shall  be  presided  over  by  the 

Chairperson or a full-time Member authorized 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).] 

(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  motu  or  on  a  reference  made  to  it  by  the  Central 
Government, for such class of bodies corporate or persons, in such manners 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 (38 of 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         

(5 of 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 1[five lakh rupees], but which may extend to ten times of the fees received, 

in case of firms; 
2[(B) debarring the member or the firm from— 

I. being appointed as an auditor or internal auditor or undertaking any audit in respect t 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.] 

Explanation.—For the purposes of this 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        (38 
of 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 3[the Appellate Tribunal in such manner and on 
payment of such fee as may be prescribed]. 

4* 

* 

* 

* 

* 

1. Subs. by Act 1 of 2018, s. 35, for “ten lakh rupees” (w.e.f. 9-2-2018). 
2. Subs. by Act 22 of 2019, s. 20, for sub-clause (b) (w.e.f. 15-8-2019). 
3. Subs. by s. 35, ibid., for “the Appellate Authority constituted under sub-section (6) in such manner as may be   prescribed” (w.e.f. 

9-2-2018). 

4. Sub-sections (6), (7), (8) and (9) omitted by s. 35, ibid. (w.e.f. 9-2-2018). 

90 

 
 
 
 
 
 
 
 
 
                                                           
 (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. 

(13) The National Financial 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. 

(15) 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. 

133.  Central  Government  to  prescribe  accounting  standards.—The  Central  Government  may 
prescribe  the  standards  of  accounting  or  any  addendum  thereto,  as  recommended  by  the  Institute  of 
Chartered Accountants of India, constituted under section 3 of the Chartered Accountants Act, 1949         (38 
of  1949),  in  consultation  with  and  after  examination  of  the  recommendations  made  by  the  National 
Financial Reporting Authority: 

1[Provided that until the National Financial Reporting Authority is constituted under section 132 of the 
Companies Act, 2013 (18 of 2013), the Central Government may prescribe the standards of accounting or 
any  addendum  thereto,  as recommended  by  the  Institute of  Chartered  Accountants of  India,  constituted 
under  section  3  of  the  Chartered  Accountants  Act,  1949  (38  of  1949),  in  consultation  with  and  after 
examination  of  the  recommendations  made  by  National  Advisory  Committee  on  Accounting  Standards 
constituted under section 210A of the Companies Act, 1956 (1 of 1956).] 

134. Financial statement, Board’s report, etc.— 2[(1) 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.] 

(2) The auditors’ report shall be attached to every financial statement. 
(3) There shall be attached to statements laid before a company in general meeting, a report by its Board of 

Directors, which shall include— 

3[(a) the web address, if any, where annual return referred to in sub-section (3) of section 92 has been 

placed;] 

(b) number of meetings of the Board; 
(c) Directors’ Responsibility Statement; 
4[(ca) details in respect of frauds reported by auditors under sub-section (12) of section 143 other than 

those which are reportable to the Central Government;] 

(d) a statement on declaration given by independent directors under sub-section (6) of section 149; 

1. Ins. by notification No. S.O. 1227(E), dated 29th March, 2016 (w.e.f 1-4-2015). 
2. Subs. by Act 1 of 2018, s. 36, sub-section (1) (w.e.f. 31-7-2018). 
3. Subs. by s. 36, ibid., for clause (a) (w.e.f. 31-7-2018). 
4. Ins. by Act 21 of 2015, s. 12 (w.e.f. 29-5-2015). 

91 

 
                                                           
(e) in case of a company covered under sub-section (1) of section 178, company’s policy on directors’ 
appointment  and  remuneration  including  criteria  for  determining  qualifications,  positive  attributes, 
independence of a director and other matters provided under sub-section (3) of section 178; 

(f)  explanations or  comments by  the  Board  on  every  qualification,  reservation  or  adverse  remark  or 

disclaimer made— 

(i) by the auditor in his report; and 
(ii) by the company secretary in practice in his secretarial audit report; 

(g) particulars of loans, guarantees or investments under section 186; 
(h) particulars of contracts or arrangements with related parties referred to in sub-section (1) of section 

188 in the prescribed form; 

(i) the state of the company’s affairs; 
(j) the amounts, if any, which it proposes to carry to any reserves; 
(k) the amount, if any, which it recommends should be paid by way of dividend; 
(l) material changes and commitments, if any, affecting the financial position of the company which 
have occurred between the end of the financial year of the company to which the financial statements relate 
and the date of the report; 

(m) the conservation of energy, technology absorption, foreign exchange earnings and outgo, in such 

manner as may be prescribed; 

(n)  a  statement  indicating  development  and  implementation  of  a  risk  management  policy  for  the 
company including identification therein of elements of risk, if any, which in the opinion of the Board may 
threaten the existence of the company; 

(o)  the  details  about  the  policy  developed  and  implemented  by  the  company  incorporate  social 

responsibility initiatives taken during the year; 

(p) in case of a listed company and every other public company having such paid-up share capital as 
may  be  prescribed,  a  statement  indicating  the  manner  in  which  formal  1[annual  evaluation  of  the 
performance of the Board, its Committees and of individual directors has been made]; 

(q) such other matters as may be prescribed: 
2[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.] 
3[(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.] 

(4) The report of the Board of Directors to be attached to the financial statement under this section shall, in 
case  of  a One Person Company,  mean a report containing  explanations or  comments by  the  Board  on  every 
qualification, reservation or adverse remark or disclaimer made by the auditor in his report. 

(5) The Directors’ Responsibility Statement referred to in clause (c) of sub-section (3) shall state that— 
(a) in the preparation of the annual accounts, the applicable accounting standards had been followed 

along with proper explanation relating to material departures; 

(b)  the  directors  had  selected  such accounting  policies  and  applied them  consistently  and  made 
judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state 
of affairs of the company at the end of the financial year and of the profit and loss of the company for 
that period; 

(c) the directors had taken proper and sufficient care for the maintenance of adequate accounting 
records in accordance with the provisions of this Act for safeguarding the assets of the company and 
for preventing and detecting fraud another irregularities; 

(d) the directors had prepared the annual accounts on a going concern basis; and 
(e) the directors, in the case of a listed company, had laid down internal financial controls to be 
followed  by  the  company  and that  such internal  financial controls are  adequate  and  were  operating 
effectively. 

1.  Subs.  by  Act  1  of  2018,  s.  36,  for  “annual  evaluation  has  been  made  by  the  Board  of  its  own  performance  and  that  of  its 

committees and individual directors” (w.e.f. 31-7-2018).  

2. The provisos ins. by s. 36, ibid., (w.e.f. 31-7-2018).   
3. Sub-section (3A) ins. by s. 36, ibid., (w.e.f. 31-7-2018).  

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Explanation.—For  the  purposes  of  this  clause,  the  term  “internal  financial  controls”  means  the 
policies and procedures adopted by the company for ensuring the orderly and efficient conduct of its 
business, including adherence to company’s policies, the safeguarding of its assets, the prevention and 
detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely 
preparation of reliable financial information; 

(f)  the  directors  had  devised  proper  systems  to  ensure  compliance  with  the  provisions  of  all 

applicable laws and that such systems were adequate and operating effectively. 
 (6)  The  Board’s  report  and  any  annexures  thereto  under  sub-section  (3)  shall  be  signed  by  its 
chairperson of the company if he is authorised by the Board and where he is not so authorised, 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. 

(7) A signed copy of every financial statement, including consolidated financial statement, if any, shall 

be issued, circulated or published along with a copy each of— 

(a) any notes annexed to or forming part of such financial statement; 
(b) the auditor’s report; and 
(c) the Board’s report referred to in sub-section (3). 

1[(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.] 

135. Corporate Social Responsibility.—(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  2[the  immediately  preceding  financial  year]  shall  constitute  a  Corporate  Social  Responsibility 
Committee of the Board consisting of three or more directors, out of which at least one director shall be an 
independent director: 

3[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.] 

(2)  The  Board's  report  under  sub-section  (3)  of  section  134  shall  disclose  the  composition  of  the 

Corporate Social Responsibility Committee. 

(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 4[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. 

(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. 
(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, 5[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 where 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            

1. Subs. by Act 29 of 2020, s. 26, for sub-section (8) (w.e.f. 21-12-2020). 
2. Subs. by Act 1 of 2018, s. 37, for “any financial year” (w.e.f. 19-9-2018). 
3. The proviso ins. by s. 37, ibid., (w.e.f. 19-9-2018).  
4. Subs. by s. 37, ibid., for “as specified in Schedule VII” (w.e.f. 19-9-2018). 
5. Ins. by Act 22 of 2019, s. 21 (w.e.f. 22-1-2021). 

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1[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 years]. 

2[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.] 

3[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.] 

4[(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  pursuance  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. 

5[(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.] 

(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.] 

6[(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.] 

136. Right of member to copies of audited financial statement.—(1)  7*** a copy of the financial 
statements, including consolidated financial statements, if any, auditor’s report and every other document 
required by law to be annexed or attached to the financial statements, which are to be laid before a company 
in its general meeting, shall be sent to every member of the company, to every trustee for the debenture-
holder of any debentures issued by the company, and to all persons other than such member or trustee, 
being the person so entitled, not less than twenty-one days before the date of the meeting: 

8[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] in the case of a listed company, the provisions of this sub-section shall be deemed 
to be complied with, if the copies of the documents are made available for inspection at its registered 

1. Ins. by Act 22 of 2019, s. 21 (w.e.f. 22-1-2021). 
2. The Proviso ins. by Act 29 of 2020, s. 27 (w.e.f. 22-1-2021). 
3. Subs. by Act 1 of 2018, s. 37, for the Explanation (w.e.f. 19-9-2018).  
4. Ins. by Act 22 of 2019, s. 21 (w.e.f. 22-1-2021). 
5. Subs. by Act 29 of 2020, s. 27, for sub-section (7) (w.e.f. 22-1-2021). 
6. Ins. by s. 27, ibid. (w.e.f. 22-1-2021). 
7. The words and figures “Without prejudice to the provisions of section 101” omitted by Act 1 of 2018, s. 38, (w.e.f. 9-2-2018). 
8. Subs. by s. 38, ibid., for “Provided that” (w.e.f. 9-2-2018). 

94 

 
                                                           
office  during  working  hours  for  a  period  of  twenty-one  days  before  the  date  of  the  meeting  and  a 
statement  containing  the  salient  features  of  such  documents  in  the  prescribed  form  or  copies  of  the 
documents, as the company may deem fit, is sent to every member of the company and to every trustee 
for the holders of any debentures issued by the company not less than twenty-one days before the date 
of the meeting unless the shareholders ask for full financial statements: 

1[Provided  also]  that  the  Central  Government  may  prescribe  the  manner  of  circulation  of  financial 

statements of companies having such net worth and turnover as may be prescribed: 

Provided  also that  a  listed  company  shall  also  place  its  financial  statements  including  consolidated 
attached 
other 

financial 
thereto, on its website, which is maintained by or on behalf of the company:  

statements, 

documents 

required 

any, 

and 

all 

be 

to 

if 

2[Provided also that every listed company having a subsidiary or subsidiaries shall place separate audited 

accounts in respect of each of subsidiary on its website, if any: 

 Provided also that a listed company which has a subsidiary incorporated outside India (herein referred 

to as “foreign subsidiary”)— 

(a) where such foreign subsidiary is statutorily required to prepare consolidated financial statement 
under  any  law  of  the  country  of  its  incorporation,  the  requirement  of  this  proviso  shall  be  met  if 
consolidated financial statement of such foreign subsidiary is placed on the website of the listed company; 
(b) where such foreign subsidiary is not 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.] 

(2)  A  company  shall  allow  every  member  or  trustee  of  the  holder  of  any  debentures  issued  by  the 
company to inspect the documents stated under sub-section (1) at its registered office during business hours. 
3[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.] 

(3) If any default is made in complying with the provisions of this section, the company shall be liable 
to a penalty of twenty-five thousand rupees and every officer of the company who is in default shall be 
liable to a penalty of five thousand rupees. 

137. Copy of financial statement to be filed with Registrar.—(1) A copy of the financial statements, 
including consolidated financial statement, if any, along with all the documents which are required to be or 
attached to  such financial statements under this  Act, duly  adopted  at  the  annual  general  meeting  of the 
company, shall be filed with the Registrar within thirty days of the date of annual general meeting in such 
manner, with such fees or additional fees as may be prescribed 4***: 

Provided that where the financial statements under sub-section (1) are not adopted at annual general 
meeting or adjourned annual general meeting, such unadopted financial statements along with the required 
documents under sub-section (1) shall be filed with the Registrar within thirty days of the date of annual 
general meeting and the Registrar shall take them in his records as provisional till the financial statements 
are filed with him after their adoption in the adjourned annual general meeting for that purpose: 

Provided further that financial statements adopted in the adjourned annual general meeting shall be 
filed with the Registrar within thirty days of the date of such adjourned annual general meeting with such 
fees or such additional fees as may be prescribed 1***: 

Provided also that a One Person Company shall file a copy of the financial statements duly adopted by 
its member, along with all the documents which are required to be attached to such financial statements, 
within one hundred eighty days from the closure of the financial year: 

1. Subs. by Act 1 of 2018, s. 38, for “Provided further” (w.e.f. 9-2-2018). 
2. Subs. by s. 38, ibid., for the Fourth proviso (w.e.f. 9-2-2018). 
3. The proviso ins. by s. 38, ibid. (w.e.f. 9-2-2018). 
4. The words and figures “within the time specified under section 403” omitted by s. 39, ibid., (w.e.f. 7-5-2018).  

95 

 
                                                           
 
Provided also that a company shall, along with its financial statements to be filed with the Registrar, 
attach the accounts of its subsidiary or subsidiaries which have been incorporated outside India and which 
have not established their place of business in India. 

1[Provided  also  that  in  the  case  of  a  subsidiary  which  has  been  incorporated  outside  India  (herein 
referred to as “foreign subsidiary”), which is not 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 
requirements of the fourth proviso shall be met if the holding Indian company files such unaudited financial 
statement along with a declaration to this effect and where such financial statement is in a language other 
than English, along with a translated copy of the financial statement in English.] 

(2)  Where  the  annual  general  meeting  of  a  company  for  any  year  has  not  been  held,  the  financial 
statements along with the documents required to be attached under sub-section (1), duly signed along with 
the statement of facts and reasons for not holding the annual general meeting shall be filed with the Registrar 
within thirty days of the last date before which the annual general meeting should have been held and in 
such manner, with such fees or additional fees as may be prescribed 2***. 

(3) If a company fails to file the copy of the financial statements under sub-section (1) or                       sub-
section (2), as the case may be, before the expiry of the period specified  3[therein] the company shall be 
4[liable to a penalty] of 5[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,] 
and the managing director and the Chief Financial Officer of the company, if any, and, in the absence of 
the managing director and the Chief Financial Officer, any other director who is charged by the Board with 
the responsibility of complying with the provisions of this section, and, in the absence of any such director, 
all the directors of the company, shall be 6[shall be liable to a penalty of 7[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 8[fifty thousand rupees.] 

138. Internal audit.—(1) Such class or classes of companies as may be prescribed shall be required 

to appoint an internal auditor, who shall either be a chartered accountant or a cost accountant, or such 
other professional as may be decided by the Board to conduct internal audit of the functions and activities 
of the company. 

(2) The Central Government may, by rules, prescribe the manner and the intervals in which the internal 

audit shall be conducted and reported to the Board. 

CHAPTER X 
AUDIT AND AUDITORS 

139. Appointment of auditors.—(1) Subject to the provisions of this Chapter, every company shall, 
at the first annual general meeting, appoint an individual or a firm as an auditor who shall hold office from 
the conclusion of that meeting till the conclusion of its sixth annual general meeting and thereafter till the 
conclusion of every sixth meeting and the manner and procedure of selection of auditors by the members 
of the company at such meeting shall be such as may be prescribed: 

* 

9* 
Provided  further  that  before  such  appointment  is  made,  the  written  consent  of  the  auditor  to  such 
appointment, and a certificate from him or it that the appointment, if made, shall be in accordance with the 
conditions as may be prescribed, shall be obtained from the auditor: 

* 

* 

* 

1. The proviso ins. by Act 1 of 2018, s. 39 (w.e.f. 7-5-2018).  
2. The words and figures “within the time specified, under section 403” omitted by s. 39, ibid.  (w.e.f. 7-5-2018). 
3. Subs. by s. 39, ibid., for “in section 403” (w.e.f. 7-5-2018).  
4. Subs. by Act 22 of 2019, s. 22, for “punishable with fine” (w.e.f. 2-11-2018). 
5. Subs. by Act 29 of 2020, s. 28, for “one thousand rupees for every day during which the failure continues but which shall not 

be more than ten lakh rupees” (w.e.f. 21-12-2020). 

6. Subs. by Act 22 of 2019, s. 22, for “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” (w.e.f. 2-11-2018). 

7. Subs. by Act 29 of 2020, s. 28, for “one lakh rupees” (w.e.f. 21-12-2020). 
8. Subs. by s. 28, ibid., for “five lakh rupees” (w.e.f. 21-12-2020). 
9. The first proviso omitted by Act 1 of 2018, s. 40 (w.e.f. 7-5-2018).  

96 

 
 
 
 
 
 
 
 
 
                                                           
Provided also that the certificate shall also indicate whether the auditor satisfies the criteria provided in 

section 141: 

Provided also that the company shall inform the auditor concerned of his or its appointment, and also 
file a notice of such appointment with the Registrar within fifteen days of the meeting in which the auditor 
is appointed. 

Explanation.—For the purposes of this Chapter, “appointment” includes re-appointment. 

(2)  No  listed  company  or  a  company  belonging  to  such  class  or  classes  of  companies  as  may  be 

prescribed, shall appoint or re-appoint— 

(a) an individual as auditor for more than one term of five consecutive years; and 

(b) an audit firm as auditor for more than two terms of five consecutive years: 

Provided that— 

(i) an individual auditor who has completed his term under clause (a) shall not be eligible for 

re-appointment as auditor in the same company for five years from the completion of his term; 

(ii) an audit firm which has completed its term under clause (b), shall not be eligible for          re-

appointment as auditor in the same company for five years from the completion of such term: 

Provided further that 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 auditor of the same company for a period of five years: 

1[Provided  also that  every  company,  existing  on  or  before  the  commencement  of  this  Act  which  is 
required to comply with the provisions of this sub-section, shall comply with requirement of this               sub-
section within a period which shall not be later than the date of the first annual general meeting of the 
company held, within the period specified under sub-section (1) of section 96, after three years from the 
date of commencement of this Act:] 

Provided also that, nothing contained in this sub-section shall prejudice the right of the company to 

remove an auditor or the right of the auditor to resign from such office of the company. 

(3) Subject to the provisions of this Act, members of a company may resolve to provide that— 

(a)  in  the  audit  firm  appointed  by  it,  the  auditing  partner  and  his  team  shall  be  rotated  at  such 

intervals as may be resolved by members; or 

(b) the audit shall be conducted by more than one auditor. 

(4) The Central Government may, by rules, prescribe the manner in which the companies shall rotate 

their auditors in pursuance of sub-section (2). 

Explanation.—For  the  purposes  of  this  Chapter,  the  word  “firm”  shall  include  a  limited  liability 

partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009). 

(5) Notwithstanding anything contained in sub-section (1), in the case of a Government company or 
any other company owned or controlled, directly or indirectly, by the Central Government, or by any State 
Government  or  Governments,  or  partly  by  the  Central  Government  and  partly  by  one  or  more  State 
Governments, the Comptroller and Auditor-General of India shall, in respect of a financial year, appoint an 
auditor duly qualified to be appointed as an auditor of companies under this Act, within a period of one 
hundred  and  eighty  days  from  the  commencement  of  the  financial  year,  who  shall  hold  office  till  the 
conclusion of the annual general meeting. 

(6) Notwithstanding anything contained in sub-section (1), 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 in the case of failure of the Board to appoint such auditor, it shall inform 
the members of the company, who shall within ninety days at an extraordinary general meeting appoint 
such auditor and such auditor shall hold office till the conclusion of the first annual general meeting. 

1. Subs. by notification No. S.O. 2264(E), dated 30th June, 2016, for the proviso (w.e.f.1-4-2014). 

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(7)  Notwithstanding  anything  contained  in  sub-section  (1)  or  sub-section  (5),  in  the  case  of  a 
Government company or any other company owned  or controlled, directly or indirectly, by the Central 
Government, or by any State Government, or Governments, or partly by the Central Government and partly 
by one or more State Governments, the first auditor shall be appointed by the Comptroller and Auditor-
General of India within sixty days from the date of registration of the company and in case the Comptroller 
and Auditor-General of India does not appoint such auditor within the said period, the Board of Directors 
of the company shall appoint such auditor within the next thirty days; and in the case of failure of the Board 
to appoint such auditor within the next thirty days, it shall inform the members of the company who shall 
appoint such auditor within the sixty days at an extraordinary general meeting, who shall hold office till the 
conclusion of the first annual general meeting. 

(8) Any casual vacancy in the office of an auditor shall— 

(i) in the case of a company other than a company whose accounts are subject to audit by an auditor 
appointed by the Comptroller and Auditor-General of India, be filled by the Board of Directors within 
thirty days, but if such casual vacancy is as a result of the resignation of an auditor, such appointment 
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; 

(ii) in the case of a company whose accounts are subject to audit by an auditor appointed by the 
Comptroller and Auditor-General of India, be filled by the Comptroller and Auditor-General of India 
within thirty days: 

Provided that in case the Comptroller and Auditor-General of India does not fill the vacancy within 

the said period, the Board of Directors shall fill the vacancy within next thirty days. 

(9) Subject to the provisions of sub-section (1) and the rules made thereunder, are tiring auditor may be 

re-appointed at an annual general meeting, if— 

(a) he is not disqualified for re-appointment; 

(b) he has not given the company a notice in writing of his unwillingness to be re-appointed; and 

(c)  a  special  resolution  has  not  been  passed  at  that  meeting  appointing  some  other  auditor  or 

providing expressly that he shall not be re-appointed. 

(10) Where at any annual general meeting, no auditor is appointed or re-appointed, the existing auditor 

shall continue to be the auditor of the company. 

(11)  Where  a  company  is  required  to  constitute  an  Audit  Committee  under  section  177,  all 
appointments, including the filling of a casual vacancy of an auditor under this section shall be made after 
taking into account the recommendations of such committee. 

140. Removal, resignation of auditor and giving of special notice.—(1) The auditor appointed under 
section 139 may be removed from his office before the expiry of his term only by a special resolution of 
the  company,  after  obtaining  the  previous  approval  of  the  Central  Government  in  that  behalf  in  the 
prescribed manner: 

Provided that before taking any action under this sub-section, the auditor concerned shall be given a 

reasonable opportunity of being heard. 

(2) The auditor who has resigned from the company shall file within a period of thirty days from the 
date of resignation, a statement in the prescribed form with the company and the Registrar, and in case of 
companies referred to in sub-section (5) of section 139, the auditor shall also file such statement with the 
Comptroller and Auditor-General of India, indicating the reasons and other facts as may be relevant with 
regard to his resignation. 

1[(3) If the auditor does not comply with the provisions of sub-section (2), he or it shall be liable to a 
penalty of fifty thousand rupees or an amount equal to the remuneration of the auditor, whichever is less, 

1. Subs. by Act 22 of 2019, s. 23, for sub-section (3) (w.e.f. 2-11-2018). 

98 

 
                                                           
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 1[two lakh rupees].] 

(4) (i) Special notice shall be required for a resolution at an annual general meeting appointing as auditor 
a person other than a retiring auditor, or providing expressly that a retiring auditor shall not be           re-
appointed, except where the retiring auditor has completed a consecutive tenure of five years or, as the case 
may be, ten years, as provided under sub-section (2) of section 139. 

(ii) On receipt of notice of such a resolution, the company shall forthwith send a copy thereof to the 

retiring auditor. 

(iii)  Where  notice  is  given  of  such  a  resolution  and  the  retiring  auditor  makes  with  respect  thereto 
representation in writing to the company (not exceeding a reasonable length) and requests its notification 
to members of the company, the company shall, unless the representation is received by it too late for it to 
do so,— 

(a)  in  any  notice  of  the  resolution  given  to  members  of  the  company,  state  the  fact  of  the 

representation having been made; and 

(b)  send  a  copy  of  the  representation  to  every  member  of  the  company  to  whom  notice  of  the 

meeting is sent, whether before or after the receipt of the representation by the company, 

and if a copy of the representation is not sent as aforesaid because it was received too late or because of the 
company’s  default,  the  auditor  may  (without  prejudice  to  his  right  to  be  heard  orally)  require  that  the 
representation shall be read out at the meeting: 

Provided that if a copy of representation is not sent as aforesaid, a copy thereof shall be filed with the 

Registrar: 

Provided further that if the Tribunal is satisfied on an application either of the company or of any other 
aggrieved person that the rights conferred by this sub-section are being abused by the auditor, then, the 
copy of the representation may not be sent and the representation need not be read out at the meeting. 

(5) Without prejudice to any action under the provisions of this Act or any other law for the time being 
in force, the Tribunal either suo motu or on an application made to it by the Central Government or by any 
person concerned, if it is satisfied that the auditor of a company has, whether directly or in directly, acted 
in a fraudulent manner or abetted or colluded in any fraud by, or in relation to, the company or its directors 
or officers, it may, by order, direct the company to change its auditors: 

Provided that if the application is made by the Central Government and the Tribunal is satisfied that 
any change of the auditor is required, it shall within fifteen days of receipt of such application, make an 
order that he shall not function as an auditor and the Central Government may appoint another auditor in 
his place: 

Provided further that an auditor, whether individual or firm, against whom final order has been passed 
by the Tribunal under this section shall not be eligible to be appointed as an auditor of any company for a 
period of five years from the date of passing of the order and the auditor shall also be liable for action under 
section 447. 

Explanation I.—It is hereby clarified that the case of a firm, the liability shall be of the firm and that of 
every partner or partners who acted in a fraudulent manner or abetted or colluded in any fraud by, or in 
relation to, the company or its director or officers. 

Explanation II.—For the purposes of this Chapter the word “auditor” includes a firm of auditors. 

141. Eligibility, qualifications and disqualifications of auditors.—(1) A person shall be eligible for 

appointment as an auditor of a company only if he is a chartered accountant: 

Provided that a firm whereof majority of partners practising in India are qualified for appointment as 

aforesaid may be appointed by its firm name to be auditor of a company. 

1. Subs. by Act 29 of 2020, s. 29, for “five lakh rupees” (w.e.f. 21-12-2020). 

99 

 
                                                           
(2) Where a firm including a limited liability partnership is appointed as an auditor of a company, only 

the partners who are chartered accountants shall be authorised to act and sign on behalf of the firm. 

(3) The following persons shall not be eligible for appointment as an auditor of a company, namely:— 

(a) a body corporate other than a limited liability partnership registered under the Limited Liability 

Partnership Act, 2008 (6 of 2009); 

(b) an officer or employee of the company; 

(c)  a  person  who  is  a  partner,  or  who  is  in  the  employment,  of  an  officer  or  employee  of  the 

company; 

(d) a person who, or his relative or partner— 

(i) 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: 

Provided  that  the  relative  may  hold  security  or  interest  in  the  company  office  value  not 

exceeding one thousand rupees or such sum as may be prescribed; 

(ii)  is  indebted  to  the  company,  or  its  subsidiary,  or  its  holding  or  associate  company  or  a 

subsidiary of such holding company, in excess of such amount as may be prescribed; or 

(iii) has given a guarantee or provided any security in connection with the indebtedness of any 
third person to the company, or its subsidiary, or its holding or associate company or a subsidiary 
of such holding company, for such amount as may be prescribed; 

(e) a person or a firm who, whether directly or indirectly, has business relationship with the company, 
or its subsidiary, or its holding or associate company or subsidiary of such holding company or associate 
company of such nature as may be prescribed; 

(f) a person whose relative is a director or is in the employment of the company as a director or key 

managerial personnel; 

(g) a person who is in full time employment elsewhere or a person or a  partner of a firm holding 
appointment as its auditor, if such persons or partner is at the date of such appointment or reappointment 
holding appointment as auditor of more than twenty companies; 

(h) a person who has been convicted by a court of an offence  involving fraud and a period of ten 

years has not elapsed from the date of such conviction; 

1[(i) a person who, directly or indirectly, renders any service referred to in section 144 to the company 

or its holding company or its subsidiary company. 

Explanation.—For the purposes of this clause, the term “directly or indirectly” shall have the meaning 

assigned to it in the Explanation to section 144.] 

(4) Where a person appointed as an auditor of a company incurs any of the disqualifications mentioned 
in sub-section (3) after his appointment, he shall vacate his office as such auditor and such vacation shall 
be deemed to be a casual vacancy in the office of the auditor. 

142. Remuneration of auditors.—(1) The remuneration of the auditor of a company shall be fixed in 

its general meeting or in such manner as may be determined therein: 

Provided that the Board may fix remuneration of the first auditor appointed by it. 

(2) The remuneration under sub-section (1) shall, in addition to the fee payable to an auditor, include 
the expenses, if any, incurred by the auditor in connection with the audit of the company and any facility 
extended to him but does not include any remuneration paid to him for any other service rendered by him 
at the request of the company. 

1. Subs. by Act 1 of 2018, s. 42, for clause (i) (w.e.f. 9-2-2018). 

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143. Powers and duties of auditors and auditing standards.—(1) Every auditor of a company shall 
have a right of access at all times to the books of account and vouchers of the company, whether kept at the 
registered office of the company or at any other place and shall be entitled to require from the officers of 
the company such information and explanation as he may consider necessary for the performance of his 
duties as auditor and amongst other matters inquire into the following matters, namely:— 

(a) whether loans and advances made by the company on the basis of security have been properly 
secured and whether the terms on which they have been made are prejudicial to the interests of the 
company or its members; 

(b)  whether  transactions  of  the  company  which  are  represented  merely  by  book  entries  are 

prejudicial to the interests of the company; 

(c) where the company not being an investment company or a banking company, whether so much 
of the assets of the company as consist of shares, debentures and other securities have been sold at a 
price less than that at which they were purchased by the company; 

(d) whether loans and advances made by the company have been shown as deposits; 

(e) whether personal expenses have been charged to revenue account; 
(f) where it is stated in the books and documents of the company that any shares have been allotted 
for  cash,  whether  cash  has  actually  been  received  in  respect  of  such  allotment,  and  if  no  cash  has 
actually been so received, whether the position as stated in the account books and the balance sheet is 
correct, regular and not misleading: 
Provided that the auditor of a company which is a holding company shall also have the right of access 
to the records of all 1[its subsidiaries and associate companies] in so far as it relates to the consolidation of 
its financial statements with that of 1[its subsidiaries and associate companies.] 

(2) The auditor shall make a report to the members of the company on the accounts examined by him 
and on every financial statements which are required by or under this Act to be laid before the company in 
general meeting and the report shall after taking into account the provisions of this Act, the accounting and 
auditing standards and matters which are required to be included in the audit report under the provisions of 
this Act or any rules made thereunder or under any order made under sub-section (11) and to the best of his 
information and knowledge, the said accounts, financial statements give a true and fair view of the state of 
the company’s affairs as at the end of its financial year and profit or loss and cash flow for the year and 
such other matters as may be prescribed. 

(3) The auditor’s report shall also state— 

(a) whether he has sought and obtained all the information and explanations which to the best of 
his knowledge and belief were necessary for the purpose of his audit and if not, the details thereof and 
the effect of such information on the financial statements; 

(b)  whether,  in  his  opinion,  proper  books  of account as  required  by  law  have  been  kept  by  the 
company so far as appears from his examination of those books and proper returns adequate for the 
purposes of his audit have been received from branches not visited by him; 

(c) whether the report on the accounts of any branch office of the company audited under sub-
section (8) by a person other than the company’s auditor has been sent to him under the proviso to that 
sub-section and the manner in which he has dealt with it in preparing his report; 

(d) whether the company’s balance sheet and profit and loss account dealt within the report are in 

agreement with the books of account and returns; 

(e) whether, in his opinion, the financial statements comply with the accounting standards; 
(f) the observations or comments of the auditors on financial transactions or matters which have 

any adverse effect on the functioning of the company; 

(g) whether any director is disqualified from being appointed as a director under sub-section (2) of 

section 164; 

(h) any qualification, reservation or adverse remark relating to the maintenance of accounts and 

other matters connected therewith; 

1. Subs. by Act 1 of 2018, s. 43, for “its subsidiaries” (w.e.f. 9-2-2018). 

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(i)  whether  the  company  has  adequate  1[internal  financial  controls  with  reference  to  financial 

statements] in place and the operating effectiveness of such controls; 

(j) such other matters as may be prescribed. 

(4) Where any of the matters required to be included in the audit report under this section is answered 

in the negative or with a qualification, the report shall state the reasons therefor. 

(5)  2[In  the case  of  a  Government  company  or  any  other company  owned  or  controlled, directly  or 
indirectly,  by  the  Central  Government,  or  by  any  State  Government  or  Governments,  or  partly  by  the 
Central Government and partly by one or more State Governments, the Comptroller and Auditor General 
of India shall appoint the auditor under sub-section (5) or sub-section (7) of Section 139 and direct such 
auditor the manner in which the accounts of the company are required to be audited and] thereupon the 
auditor so appointed shall submit a copy of the audit report to the Comptroller and Auditor-General of India 
which, among other things, include the directions, if any, issued by the Comptroller and               Auditor-
General of India, the action taken thereon and its impact on the accounts and financial statement of the 
company. 

(6) The Comptroller and Auditor-General of India shall within sixty days from the date of receipt of 

the audit report under sub-section (5) have a right to,— 

(a) conduct a supplementary audit of the financial statement of the company by such person or 
persons as he may authorise in this behalf; and for the purposes of such audit, require information or 
additional information to be furnished to any person or persons, so authorised, on such matters, by such 
person or persons, and in such form, as the Comptroller and Auditor-General of India may direct; and 

(b) comment upon or supplement such audit report: 

Provided  that  any  comments  given  by  the  Comptroller  and  Auditor-General  of  India  upon,  or 
supplement to, the audit report shall be sent by the company to every person entitled to copies of audited 
financial statements under sub section (1) of section 136 and also be placed before the annual general 
meeting of the company at the same time and in the same manner as the audit report. 

(7) Without prejudice to the provisions of this Chapter, the Comptroller and Auditor-General of India 
may, in case of any company covered under sub-section (5) or sub-section (7) of section 139, if he considers 
necessary, by an order, cause test audit to be conducted of the accounts of such company and the provisions 
of section 19A of the Comptroller and Auditor-General’s (Duties, Powers and Conditions of Service) Act, 
1971 (56 of 1971), shall apply to the report of such test audit. 

(8) Where a company has a branch office, the accounts of that office shall be audited either by the 
auditor appointed for the company (herein referred to as the company’s auditor) under this Act or by any 
other person qualified for appointment as an auditor of the company under this Act and appointed as such 
under section 139, or where the branch office is situated in a country outside India, the accounts of the 
branch office shall be audited either by the company’s auditor or by an accountant or by any other person 
duly qualified to act as an auditor of the accounts of the branch office in accordance with the laws of that 
country and the duties and powers of the company’s auditor with reference to the audit of the branch and 
the branch auditor, if any, shall be such as may be prescribed: 

Provided that the branch auditor shall prepare a report on the accounts of the branch examined by him 
and send it to the auditor of the company who shall deal with it in his report in such manner as he considers 
necessary. 

(9) Every auditor shall comply with the auditing standards. 

(10) The Central Government may prescribe the standards of auditing or any addendum thereto, as 
recommended  by  the  Institute  of  Chartered  Accountants  of  India,  constituted  under  section  3  of  the 
Chartered  Accountants  Act,  1949  (38  of  1949),  in  consultation  with  and  after  examination  of  the 
recommendations made by the National Financial Reporting Authority: 

1. Subs. by Act 1 of 2018,  s. 43, for “internal financial controls system” (w.e.f. 9-2-2018). 
2. Subs. by notification No. S.O. 2226(E), dated 4th September, 2014 for certain words (w.e.f. 4-9-2014).  

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Provided that until any auditing standards are notified, any standard or standards of auditing specified 

by the Institute of Chartered Accountants of India shall be deemed to be the auditing standards. 

(11) The Central Government may, in consultation with the National Financial Reporting Authority, 
by general or special order, direct, in respect of such class or description of companies, as may be specified 
in the order, that the auditor’s report shall also include a statement on such matters as may be specified 
therein: 

1[Provided that until the National Financial Reporting Authority is constituted under section 132, the 
Central Government may hold consultation required under this sub-section with the Committee chaired by 
an  officer  of  the  rank  of  Joint  Secretary  or  equivalent  in  the  Ministry  of  Corporate  Affairs  and  the 
Committee shall have the representatives from the Institute of Chartered Accountants of India and Industry 
Chambers and also special invitees from the National Advisory Committee on Accounting Standards and 
the office of the Comptroller and Auditor-General.] 

2[(12) Notwithstanding anything contained in this section, if an auditor of a company in the course of 
the  performance  of  his  duties  as  auditor,  has  reason  to  believe  that  an  offence  of  fraud  involving  such 
amount or amounts as may be prescribed, is being or has been committed in the company by its officers or 
employees,  the  auditor  shall report the  matter to the Central  Government  within  such time  and in  such 
manner as may be prescribed: 

Provided that in case of a fraud involving lesser than the specified amount, the auditor shall report the 
matter to the audit committee constituted under section 177 or to the Board in other cases within such time 
and in such manner as may be prescribed: 

Provided further that the companies, whose auditors have reported frauds under this sub-section to the 
audit committee or the Board but not reported to the Central Government, shall disclose the details about 
such frauds in the Board's report in such manner as may be prescribed.] 

(13) No duty to which an auditor of a company may be subject to shall be regarded as having been 
contravened by reason of his reporting the matter referred to in sub-section (12) if it is done in good faith. 

(14) The provisions of this section shall mutatis mutandis apply to— 

(a) the 3[cost accountant] conducting cost audit under section 148; or 

(b) the company secretary in practice conducting secretarial audit under section 204. 

4[(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.] 

144. Auditor not to render certain services.—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  which  shall  not  include  any  of  the  following  services  (whether  such  services  are 
rendered directly or indirectly to the company), or its holding company or subsidiary company, namely:— 

(a) accounting and book keeping services; 

(b) internal audit; 

(c) design and implementation of any financial information system; 

(d) actuarial services; 

(e) investment advisory services; 

(f) investment banking services; 

1. Ins. by notification No. S.O. 1226(E), dated 29th March, 2016 (w.e.f. 10-4-2015). 
2. Subs. by Act 21 of 2015, s. 13, for sub-section (12) (w.e.f. 14-12-2015). 
3. Subs. by Act 1 of 2018, s. 43, for “cost accountant in practice” (w.e.f. 9-2-2018). 
4. Subs. by Act 29 of 2020, s. 30, for sub-section (15) (w.e.f. 21-12-2020). 

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(g) rendering of outsourced financial services; 

(h) management services; and 

(i) any other kind of services as may be prescribed: 

Provided that an auditor or audit firm who or which has been performing any non-audit services on or 
before the commencement of this Act shall comply with the provisions of this section before the closure of 
the first financial year after the date of such commencement. 

Explanation.—For  the  purposes  of  this  sub-section,  the  term  “directly  or  indirectly”  shall  include 

rendering of services by the auditor,— 

(i) in case of auditor being an individual, either himself or through his relative or any other person 
connected or associated with such individual or through any other entity, whatsoever, in which such 
individual has significant influence or control, or whose name or trade mark or brand is used by such 
individual; 

(ii) in case of auditor being a firm, either itself or through any of its partners or through its parent, 
subsidiary or associate entity or through any other entity, whatsoever, in which the firm or any partner 
of the firm has significant influence or control, or whose name or trade mark or brand is used by the 
firm or any of its partners. 

145. Auditor to sign audit reports, etc.—The person appointed as an auditor of the company shall 
sign  the  auditor’s  report  or  sign  or  certify  any  other  document  of  the  company  in  accordance  with  the 
provisions of sub-section (2) of section 141, and the qualifications, observations or comments on  financial 
transactions or matters, which have any adverse effect on the functioning of the company mentioned in the 
auditor’s report shall be read before the company in general meeting and shall be open to inspection by any 
member of the company. 

146. Auditors to attend general meeting.—All notices of, and other communications relating to, any 
general meeting shall be forwarded to the auditor of the company, and the auditor shall, unless otherwise 
exempted by the company, attend either by himself or through his authorised representative, who shall also 
be qualified to be an auditor, any general meeting and shall have right to be heard at such meeting on any 
part of the business which concerns him as the auditor. 

147.  Punishment  for  contravention.—(1)  If  any  of  the  provisions  of  sections  139  to  146  (both 

inclusive)  is  contravened,  the  company  shall  be  punishable  with  fine  which  shall  not  be  less  than            
twenty-five thousand rupees but which may extend to five lakh rupees and every officer of the company 
who is in default shall be punishable 1*** with fine which shall not be less than ten thousand rupees but 
which may extend to 2[one lakh rupees]. 

(2) 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  twenty-five 
thousand rupees but which may extend to five lakh rupees 3[or four times the remuneration of the auditor, 
whichever is less]: 

Provided that if an auditor has contravened such provisions knowingly or willfully with the intention 
to  deceive  the  company  or  its  shareholders  or  creditors  or  tax  authorities,  he  shall  be  punishable  with 
imprisonment for a term which may extend to one year  4[and with fine 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]. 

(3) Where an auditor has been convicted under sub-section (2), he shall be liable to— 

(i) refund the remuneration received by him to the company; and 

1. The words “with imprisonment for a term which may extend to one year or” omitted by Act 29 of 2020, s. 31 (w.e.f. 21-12-

2020). 

2. Subs. by s. 31, ibid., for “one lakh rupees, or with both” (w.e.f. 21-12-2020). 
3. Ins. by Act 1 of 2018, s. 44 (w.e.f. 9-2-2018). 
4. Subs. by Act 1 of 2018, s. 44, for “and with fine which shall not be less than one lakh rupees but which may extend to twenty-

five lakh rupees” (w.e.f. 9-2-2018). 

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(ii) pay for damages to the company, statutory bodies or authorities 1[or to members or creditors of 
the company] for loss arising out of incorrect or misleading statements of particulars made in his audit 
report. 

(4) The Central Government shall, by notification, specify any statutory body or authority or an officer 
for ensuring prompt payment of damages to the company or the persons under clause (ii) of            sub-
section (3) and such body, authority or officer shall after payment of damages to such company or persons 
file a report with the Central Government in respect of making such damages in such manner as may be 
specified in the said notification. 

(5) Where, in case of audit of a company being conducted by an audit firm, it is proved that the partner 
or partners of the audit firm has or have acted in a fraudulent manner or a betted or colluded in any fraud 
by, or in relation to or by, the company or its directors or officers, the liability, whether civil or criminal as 
provided in this Act or in any other law for the time being in force, for such act shall be of the partner or 
partners concerned of the audit firm and of the firm jointly and severally. 

2[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.] 

148. Central Government to specify audit of items of cost in respect of certain companies.—(1) 
Notwithstanding anything contained in this Chapter, the Central Government may, by order, in respect of 
such class of companies engaged in the production of such goods or providing such services as may be 
prescribed, direct that particulars relating to the utilisation of material or labour or to other items of cost as 
may be prescribed shall also be included in the books of account kept by that class of companies: 

Provided  that  the  Central  Government  shall,  before  issuing  such  order  in  respect  of  any  class  of 
companies regulated under a special Act, consult the regulatory body constituted or established under such 
special Act. 

(2) If the Central Government is of the opinion, that it is necessary to do so, it may, by order, direct that 
the audit of cost records of class of companies, which are covered under sub-section (1) and which have a 
net worth of such amount as may be prescribed or a turnover of such amount as may be prescribed, shall 
be conducted in the manner specified in the order. 

(3) The audit under sub-section (2) shall be conducted by a 3[cost accountant] who shall be appointed 
by  the  Board  on  such  remuneration  as  may  be  determined  by  the  members  in  such  manner  as  may  be 
prescribed: 

Provided that no person appointed under section 139 as an auditor of the company shall be appointed 

for conducting the audit of cost records: 

Provided further that the auditor conducting the cost audit shall comply with the cost auditing standards. 

Explanation.—For the purposes of this sub-section, the expression “cost auditing standards” mean such 
standards  as are issued  by the  4[Institute  of  Cost  Accountants  of  India],  constituted  under  the  Cost  and 
Works Accountants Act, 1959 (23 of 1959), with the approval of the Central Government. 

(4) An audit conducted under this section shall be in addition to the audit conducted under section 143. 

(5) The qualifications, disqualifications, rights, duties and obligations applicable to auditors under this 
Chapter shall, so far as may be applicable, apply to a cost auditor appointed under this section and it shall 
be  the duty  of  the company  to  give  all assistance  and  facilities to  the  cost  auditor  appointed  under this 
section for auditing the cost records of the company: 

Provided that the report on the audit of cost records shall be submitted by the 5[cost accountant] to the 

Board of Directors of the company. 

1. Subs. by Act 1 of 2018, s. 44, for “or to any other persons” (w.e.f. 9-2-2018). 
2. The proviso ins. by s. 44, ibid., (w.e.f. 9-2-2018). 
3. Subs. by s. 45, ibid., for “Cost Accountant in practice”(w.e.f. 9-2-2018). 
4. Subs. by s. 45, ibid., for “Institute of Cost and Works Accountants of India” (w.e.f. 9-2-2018). 
5. Subs. by s. 45, ibid., for “cost accountant in practice”(w.e.f. 9-2-2018). 

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(6) A company shall within thirty days from the date of receipt of a copy of the cost audit report prepared 
in pursuance of a direction under sub-section (2) furnish the Central Government with such report along 
with full information and explanation on every reservation or qualification contained therein. 

(7)  If,  after  considering  the  cost audit  report  referred  to  under  this  section  and the  information  and 
explanation furnished by the company under sub-section (6), the Central Government is of the opinion that 
any further information or explanation is necessary, it may call for such further information and explanation 
and the company shall furnish the same within such time as may be specified by that Government. 

(8) If any default is made in complying with the provisions of this section,— 

(a) the  company  and  every  officer of the  company  who  is  in  default  shall  be  punishable  in  the 

manner as provided in sub-section (1) of section 147; 

(b) the cost auditor of the company who is in default shall be punishable in the manner as provided 

in sub-sections (2) to (4) of section 147. 

CHAPTER XI 

APPOINTMENT AND QUALIFICATIONS OF DIRECTORS 

149.  Company to  have  Board  of  Directors.—(1)  Every  company  shall  have  a  Board  of  Directors 

consisting of individuals as directors and shall have— 

(a) a minimum number of three directors in the case of a public company, two directors in the case 

of a private company, and one director in the case of a One Person Company; and 

(b) a maximum of fifteen directors: 

Provided that a company may appoint more than fifteen directors after passing a special resolution: 

Provided further that such class or classes of companies as may be prescribed, shall have at least one 

woman director. 

(2) Every company existing on or before the date of commencement of this Act shall within one year 

from such commencement comply with the requirements of the provisions of sub-section (1). 

1[(3) Every company shall have at least one director who stays in India for a total period of not less than 

one hundred and eighty-two days during the financial year:  

Provided that in case of a newly incorporated company the requirement under this sub-section shall 

apply proportionately at the end of the financial year in which it is incorporated]; 

 (4)  Every  listed  public  company  shall  have  at  least  one-third  of  the  total  number  of  directors  as 
independent  directors  and the  Central  Government  may  prescribe the  minimum  number  of independent 
directors in case of any class or classes of public companies. 

Explanation.—For the purposes of this sub-section, any fraction contained in such one-third number 

shall be rounded off as one. 

(5) Every company existing on or before the date of commencement of this Act shall, within one year 
from such commencement or from the date of notification of the rules in this regard as may be applicable, 
comply with the requirements of the provisions of sub-section (4). 

(6) An independent director in relation to a company, means a director other than managing director or 

a whole-time director or a nominee director,— 

(a) who, in the opinion of the Board, is a person of integrity and possesses relevant expertise and 

experience; 

(b) (i) who is or was not a promoter of the company or its holding, subsidiary or associate company; 

(ii) who is not related to promoters or directors in the company, its holding, subsidiary or associate 

company; 

1. Subs. by Act 1 of 2018, s. 46, for sub-section (3) (w.e.f. 7-5-2018).  

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(c) who has or had no 1[pecuniary relationship, other than remuneration as such director or having 
transaction not exceeding ten per cent. of his total income or such amount as may be prescribed,] with 
the company, its holding, subsidiary or associate company, or their promoters, or directors, during the 
two immediately preceding financial years or during the current financial year; 

2[(d) none of whose relatives— 

(i)  is  holding  any  security  of  or  interest  in  the  company,  its  holding,  subsidiary  or  associate 
company during the two immediately preceding financial years or during the current financial year:  

Provided that the relative may hold security or interest in the company of face value not exceeding 
fifty lakh rupees or two per cent. of the paid-up capital of the company, its holding, subsidiary or 
associate company or such higher sum as may be prescribed;  

(ii) is indebted to the company, its holding, subsidiary or associate company or their promoters, 
or directors, in excess of such amount as may be prescribed during the two immediately preceding 
financial years or during the current financial year;  

(iii) has given a guarantee or provided any security in connection with the indebtedness of any 
third  person  to  the  company,  its  holding,  subsidiary  or  associate  company  or  their  promoters,  or 
directors of such holding company, for such amount as may be prescribed during the two immediately 
preceding financial years or during the current financial year; or 

(iv) has any other pecuniary transaction or relationship with the company, or its subsidiary, or its 
holding or associate company amounting to two per cent. or more of its gross turnover or total income 
singly or in combination with the transactions referred to in sub-clause (i), (ii) or (iii);] 

(e) who, neither himself nor any of his relatives— 

(i) holds or has held the position of a key managerial personnel or is or has been employee of 
the company or its holding, subsidiary or associate company in any of the three financial years 
immediately preceding the financial year in which he is proposed to be appointed; 

3[Provided that in case of a relative who is an employee, the restriction under this clause shall 

not apply for his employment during preceding three financial years.] 

(ii) is or has been an employee or proprietor or a partner, in any of the three financial years 

immediately preceding the financial year in which he is proposed to be appointed, of— 

(A) a firm of auditors or company secretaries in practice or cost auditors of the company or 

its holding, subsidiary or associate company; or 

(B) any legal or a consulting firm that has or had any transaction with the company, its 
holding,  subsidiary  or  associate  company  amounting  to  ten  per  cent.  or  more  of  the  gross 
turnover of such firm; 

(iii) holds together with his relatives two per cent. or more of the total voting power of the 

company; or 

(iv) is a Chief Executive or director, by whatever name called, of any nonprofit organisation 
that receives twenty-five per cent. or more of its receipts from the company, any of its promoters, 
directors or its holding, subsidiary or associate company or that holds two per cent. or more of the 
total voting power of the company; or 

(f) who possesses such other qualifications as may be prescribed. 

(7)  Every  independent  director shall  at  the  first  meeting  of  the  Board  in  which he  participates  as  a 
director and thereafter at the first meeting of the Board in every financial year or whenever there is any 
change in the circumstances which may affect his status as an independent director, give a declaration that 
he meets the criteria of independence as provided in sub-section (6). 

1. Subs. by Act 1 of 2018, s. 46, for “pecuniary relationship” (w.e.f. 7-5-2018). 
2. Subs. by s. 46, ibid., for  clause (d) (w.e.f. 7-5-2018).  
3. The proviso ins. by s. 46, ibid., (w.e.f. 7-5-2018). 

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Explanation.—For  the  purposes  of  this  section,  “nominee  director”  means  a  director  nominated  by  any 
financial institution in pursuance of the provisions of any law for the time being in force, or of any agreement, 
or appointed by any Government, or any other person to represent its interests. 

(8) The company and independent directors shall abide by the provisions specified in Schedule IV. 
(9) Notwithstanding anything contained in any other provision of this Act, but subject to the provisions of 
sections  197  and  198,  an  independent  director  shall  not  be  entitled  to  any  stock  option  and  may  receive 
remuneration  by  way  of  fee  provided  under  sub-section  (5)  of  section  197,  reimbursement  of  expenses  for 
participation in the Board and other meetings and profit related commission as may be approved by the members. 
1[Provided that if a company has no profits or its profits are inadequate, an independent director may receive 
remuneration,  exclusive  of  any  fees  payable  under  sub-section  (5)  of  section  197,  in  accordance  with  the 
provisions of Schedule V.] 

(10) Subject to the provisions of section 152, an independent director shall hold office for a term up to five 
consecutive years on the Board of a company, but shall be eligible for reappointment on passing of a special 
resolution by the company and disclosure of such appointment in the Board's report. 

(11) Notwithstanding anything contained in sub-section (10), no independent director shall hold office for 
more  than  two  consecutive  terms,  but  such  independent  director  shall  be  eligible  for  appointment  after  the 
expiration of three years of ceasing to become an independent director: 

Provided that an independent director shall not, during the said period of three years, be appointed in or be 

associated with the company in any other capacity, either directly or indirectly. 

Explanation.—For the purposes of sub-sections (10) and (11), any tenure of an independent director on the 

date of commencement of this Act shall not be counted as a term under those sub-sections. 

(12) Notwithstanding anything contained in this Act,— 

(i) an independent director; 
(ii) a non-executive director not being promoter or key managerial personnel, 

shall be held liable, only in respect of such acts of omission or commission by a company which had occurred 
with his knowledge, attributable through Board processes, and with his consent or connivance or where he had 
not acted diligently. 

(13) The provisions of sub-sections (6) and (7) of section 152 in respect of retirement of directors by rotation 

shall not be applicable to appointment of independent directors. 

150.  Manner  of  selection  of  independent  directors  and  maintenance  of  databank  of  independent 
directors.—(1) Subject to the provisions contained in sub-section (6) of section 149, an independent director 
may be selected from a data bank containing names, addresses and qualifications of persons who are eligible and 
willing to act as independent directors, maintained by any body, institute or association, as may be notified by 
the Central Government, having expertise in creation and maintenance of such data bank and put on their website 
for the use by the company making the appointment of such directors: 

Provided that responsibility of exercising due diligence before selecting a person from the data bank referred 

to above, as an independent director shall lie with the company making such appointment. 

(2)  The  appointment  of  independent  director  shall  be  approved  by  the  company  in  general  meeting  as 
provided in sub-section (2) of section 152 and the explanatory statement annexed to the notice of the general 
meeting called to consider the said appointment shall indicate the justification for choosing the appointee for 
appointment as independent director. 

(3) The data bank referred to in sub-section (1), shall create and maintain data of persons willing to act as 

independent director in accordance with such rules as may be prescribed. 

(4) The Central Government may prescribe the manner and procedure of selection of independent directors 

who fulfil the qualifications and requirements specified under section 149. 

151.  Appointment  of  director  elected  by  small  shareholders.—A  listed  company  may  have  one 
director elected by such small shareholders in such manner and with such terms and conditions as may be 
prescribed. 

1. Ins. by Act 29 of 2020, s. 32 (w.e.f. 18-3-2021). 

108 

 
 
                                                           
Explanation.—For  the  purposes  of  this  section  “small  shareholders”  means  a  shareholder  holding 
shares of nominal value of not more than twenty thousand rupees or such other sum as may be prescribed. 

152. Appointment of directors.—(1) Where no provision is made in the articles of a company for the 
appointment of the first director, the subscribers to the memorandum who are individuals shall be deemed 
to be the first directors of the company until the directors are duly appointed and in case of a One Person 
Company an individual being member shall be deemed to be its first director until the director or directors 
are duly appointed by the member in accordance with the provisions of this section. 

(2) Save as otherwise expressly provided in this Act, every director shall be appointed by the company 

in general meeting. 

(3) No person shall be appointed as a director of a company unless he has been allotted the Director 

Identification Number under section 154 1[or any other number as may be prescribed under section 153]. 

(4)  Every  person  proposed  to  be  appointed  as  a  director  by  the  company  in  general  meeting  or 
otherwise, shall furnish his Director Identification Number  1[or such other number as may be prescribed 
under section 153] and a declaration that he is not disqualified to become a director under this Act. 

(5) A person appointed as a director shall not act as a director unless he gives his consent to hold the 
office as director and such consent has been filed with the Registrar within thirty days of his appointment 
in such manner as may be prescribed: 

Provided  that  in  the  case  of  appointment  of  an  independent  director  in  the  general  meeting,  an 
explanatory statement for such appointment, annexed to the notice for the general meeting, shall include a 
statement  that  in  the  opinion  of  the  Board,  he  fulfils  the  conditions  specified  in  this  Act  for  such  an 
appointment. 

(6) (a) Unless the articles provide for the retirement of all directors at every annual general meeting, 

not less than two-thirds of the total number of directors of a public company shall— 

(i) be persons whose period of office is liable to determination by retirement of directors by rotation; 

and 

(ii)  save  as  otherwise  expressly  provided  in  this  Act,  be  appointed  by  the  company  in  general 

meeting. 

(b) The remaining directors in the case of any such company shall, in default of, and subject to any 

regulations in the articles of the company, also be appointed by the company in general meeting. 

(c) At the first annual general meeting of a public company held next after the date of the general meeting 
at which the first directors are appointed in accordance with clauses (a) and (b) and at every subsequent 
annual general meeting, one-third of such of the directors for the time being as are liable to retire by rotation, 
or if their number is neither three nor a multiple of three, then, the number nearest to one-third, shall retire 
from office. 

(d) The directors to retire by rotation at every annual general meeting shall be those who have been 
longest in office since their last appointment, but as between persons who became directors on the same 
day,  those  who  are  to  retire  shall,  in  default  of  and  subject  to  any  agreement  among  themselves,  be 
determined by lot. 

(e) At the annual general meeting at which a director retires as aforesaid, the company may fill up the 

vacancy by appointing the retiring director or some other person thereto. 

Explanation.—For  the  purposes  of  this  sub-section,  “total  number  of  directors”  shall  not  include 
independent directors, whether appointed under this Act or any other law for the time being in force, on the 
Board of a company. 

(7)  (a)  If  the  vacancy  of  the  retiring  director  is  not  so  filled-up  and  the  meeting  has  not  expressly 
resolved not to fill the vacancy, the meeting shall stand adjourned till the same day in the next week, at the 

1. Ins. by Act 1 of 2018, s. 47 (w.e.f. 9-2-2018). 

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same time and place, or if that day is a national holiday, till the next succeeding day which is not a holiday, 
at the same time and place. 

(b) If at the adjourned meeting also, the vacancy of the retiring director is not filled up and that meeting 
also has not expressly resolved not to fill the vacancy, the retiring director shall be deemed to have been re-
appointed at the adjourned meeting, unless— 

(i) at that meeting or at the previous meeting a resolution for the re-appointment of such director 

has been put to the meeting and lost; 

(ii)  the  retiring  director  has,  by  a  notice  in  writing  addressed  to  the  company  or  its  Board  of 

directors, expressed his unwillingness to be so re-appointed; 

(iii) he is not qualified or is disqualified for appointment; 

(iv) a resolution, whether special or ordinary, is required for his appointment or re-appointment by 

virtue of any provisions of this Act; or 

(v) section 162 is applicable to the case. 

Explanation.—For the purposes of this section and section 160, the expression “retiring director” means 

a director retiring by rotation. 

153. Application for allotment of Director Identification Number.—Every individual intending to 
be appointed as director of a company shall make an application for allotment of Director Identification 
Number to the Central Government in such form and manner and along with such fees as may be prescribed: 
1[Provided that the Central Government may prescribe any identification number which shall be treated as Director 
Identification Number for the purposes of this Act and in case any individual holds or acquires such identification number, 
the requirement of this section shall not apply or apply in such manner as may be prescribed.] 

154.  Allotment  of  Director  Identification  Number.—The  Central  Government  shall,  within  one 
month from the receipt of the application under section 153, allot a Director Identification Number to an 
applicant in such manner as may be prescribed. 

155. Prohibition to obtain more than one Director Identification Number.—No individual, who 
has already been allotted a Director Identification Number under section 154, shall apply for, obtain or 
possess another Director Identification Number. 

156. Director to intimate Director Identification Number.—Every existing director shall, within one 
month of the receipt of Director Identification Number from the Central Government, intimate his Director 
Identification Number to the company or all companies wherein he is a director. 

157. Company to inform Director Identification Number to Registrar.—(1) Every company shall, 
within fifteen days of the receipt of intimation under section 156, furnish the Director Identification Number 
of  all  its  directors  to the  Registrar  or any  other  officer  or  authority  as  may  be  specified  by  the  Central 
Government with such fees as may be prescribed or with such additional fees as may be prescribed 2*** 
and every such intimation shall be furnished in such form and manner as may be prescribed. 

3[(2) If any company fails to furnish the Director Identification Number under sub-section (1), such 
company 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 one lakh rupees, and every officer of the company who is in default shall be liable 
to a penalty of not less than 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 one lakh rupees.] 

158.  Obligation  to  indicate  Director  Identification  Number.—Every  person  or  company,  while 
furnishing any return, information or particulars as are required to be furnished under this Act, shall mention 
the  Director  Identification  Number  in  such  return,  information  or  particulars  in  case  such  return, 
information or particulars relate to the director or contain any reference of any director. 

1. The proviso ins. by Act 1 of 2018, s. 48 (w.e.f. 9-2-2018). 
2. The words and figures “within the time specified under section 403” omitted by Act 1 of 2018, s. 49 (w.e.f. 7-5-2018).   
3. Subs. by Act 22 of 2019, s. 24, for sub-section (2) (w.e.f. 2-11-2018). 

110 

 
                                                           
1[159. Penalty for default of certain provisions.—If any individual or director of a company makes 
any  default  in  complying  with  any  of  the  provisions  of  section  152,  section  155  and  section  156,  such 
individual or director of the company shall be liable to a penalty which may extend to fifty thousand rupees 
and where the default is a continuing one, with a further penalty which may extend to five hundred rupees 
for each day after the first during which such default continues.] 

160. Right of persons other than retiring directors to stand for directorship.— (1) A person who 
is not a retiring director in terms of section 152 shall, subject to the provisions of this Act, be eligible for 
appointment to the office of a director at any general meeting, if he, or some member intending to propose 
him as a director, has, not less than fourteen days before the meeting, left at the registered office of the 
company, a notice in writing under his hand signifying his candidature as a director or, as the case may be, 
the intention of such member to propose him as a candidate for that office, along with the deposit of one 
lakh rupees or such higher amount as may be prescribed which shall be refunded to such person or, as the 
case may be, to the member, if the person proposed gets elected as a director or gets more than twenty-five 
per cent. of total valid votes cast either on show of hands or on poll on such resolution. 

2[Provided  that  requirements  of  deposit  of  amount  shall  not  apply  in  case  of  appointment  of  an 
independent director or a director recommended by the Nomination and Remuneration Committee, if any, 
constituted under sub-section (1) of section 178 or a director recommended by the Board of Directors of 
the  Company,  in  the  case  of  a  company  not  required  to  constitute  Nomination  and  Remuneration 
Committee.] 

(2) The company shall inform its members of the candidature of a person for the office of director under 

sub-section (1) in such manner as may be prescribed. 

161.  Appointment  of  additional  director,  alternate  director  and  nominee  director.—(1)  The 
articles of a company may confer on its Board of Directors the power to appoint any person, other than a 
person who fails to get appointed as a director in a general meeting, as an additional director at any time 
who shall hold office up to the date of the next annual general meeting or the last date on which the annual 
general meeting should have been held, whichever is earlier. 

(2) The Board of Directors of a company may, if so authorised by its articles or by a resolution passed 
by the company in general meeting, appoint a person, not being a person holding any alternate directorship 
for any other director in the company 3[or holding directorship in the same company], to act as an alternate 
director for a director during his absence for a period of not less than three months from India: 

Provided that no person shall be appointed as an alternate director for an independent director unless 

he is qualified to be appointed as an independent director under the provisions of this Act: 

Provided further that an alternate director shall not hold office for a period longer than that permissible 
to the director in whose place he has been appointed and shall vacate the office if and when the director in 
whose place he has been appointed returns to India: 

Provided also that if the term of office of the original director is determined before he so returns to 
India, any provision for the automatic re-appointment of retiring directors in default of another appointment 
shall apply to the original, and not to the alternate director. 

(3) Subject to the articles of a company, the Board may appoint any person as a director nominated by 
any institution in pursuance of the provisions of any law for the time being in force or of any agreement or 
by  the  Central  Government  or  the  State  Government  by  virtue  of  its  shareholding  in  a  Government 
company. 

(4) 4*** If the office of any director appointed by the company in general meeting is vacated before his 
term of office expires in the normal course, the resulting casual vacancy may, in default of and subject to 
any regulations in the articles of the company, be filled by the Board of Directors at a meeting of the Board 
1[which shall be subsequently approved by members in the immediate next general meeting]: 

1. Subs. by Act 22 of 2019, s. 25, for section 159 (w.e.f. 2-11-2018). 
2. The proviso ins. by Act 1 of 2018, s. 50 (w.e.f. 9-2-2018). 
3. Ins. by Act 1 of 2018, s. 51 (w.e.f. 9-2-2018). 
4. The words “In the case of a public company,” omitted by s. 51, ibid. (w.e.f. 9-2-2018). 

111 

 
                                                           
Provided that any person so appointed shall hold office only up to the date up to which the director in 

whose place he is appointed would have held office if it had not been vacated. 

162. Appointment of directors to be voted individually.—(1) At a general meeting of a company, a 
motion for the appointment of two or more persons as directors of the company by a single resolution shall 
not be moved unless a proposal to move such a motion has first been agreed to at the meeting without any 
vote being cast against it. 

(2) A resolution moved in contravention of sub-section (1) shall be void, whether or not any objection 

was taken when it was moved. 

(3) A motion for approving a person for appointment, or for nominating a person for appointment as a 

director, shall be treated as a motion for his appointment. 

163. Option to adopt principle of proportional representation for appointment of         directors.—
Notwithstanding anything contained in this Act, the articles of a company may provide for the appointment 
of not less than two-thirds of the total number of the directors of a company in accordance with the principle 
of proportional representation, whether by the single transferable vote or by a system of cumulative voting 
or otherwise and such appointments may be made once in every three years and casual vacancies of such 
directors shall be filled as provided in sub-section (4) of section 161. 

164.  Disqualifications  for  appointment  of  director.—(1)  A  person  shall  not  be  eligible  for 

appointment as a director of a company, if — 

(a) he is of unsound mind and stands so declared by a competent court; 

(b) he is an undischarged insolvent; 

(c) he has applied to be adjudicated as an insolvent and his application is pending; 

(d) he has been convicted by a court of any offence, whether involving moral turpitude or otherwise, 
and sentenced in respect thereof to imprisonment for not less than six months and a period of five years 
has not elapsed from the date of expiry of the sentence: 

Provided that if a person has been convicted of any offence and sentenced in respect thereof to 
imprisonment for a period of seven years or more, he shall not be eligible to be appointed as a director 
in any company; 

(e) an order disqualifying him for appointment as a director has been passed by a court or Tribunal 

and the order is in force; 

(f) he has not paid any calls in respect of any shares of the company held by him, whether alone or 

jointly with others, and six months have elapsed from the last day fixed for the payment of the call; 

(g) he has been convicted of the offence dealing with related party transactions under section 188 

at any time during the last preceding five years; or 

(h) he has not complied with sub-section (3) of section 152. 

1[(i) he has not complied with the provisions of sub-section (1) of section 165.] 

(2) No person who is or has been a director of a company which— 

(a) has not filed financial statements or annual returns for any continuous period of three financial 

years; or 

(b) has failed to repay the deposits accepted by it or pay interest thereon or to redeem any debentures 
on the due date or pay interest due thereon or pay any dividend declared and such failure to pay or 
redeem continues for one year or more, 

shall be eligible to be re-appointed as a director of that company or appointed in other company for a period 
of five years from the date on which the said company fails to do so: 

1. Ins. by Act 22 of 2019, s. 26 (w.e.f. 2-11-2018). 

112 

 
                                                           
1[Provided that where a person is appointed as a director of a company which is in default of clause (a) or 

clause (b), he shall not incur the disqualification for a period of six months from the date of his appointment.] 

(3) A private company may by its articles provide for any disqualifications for appointment as a director 

in addition to those specified in sub-sections (1) and (2). 

2[Provided  that  the  disqualifications  referred  to  in  clauses  (d),  (e)  and  (g)  of  sub-section  (1)  shall 
continue  to  apply  even  if  the  appeal  or  petition  has  been  filed  against  the  order  of  conviction  or 
disqualification.] 

165. Number of directorships.—(1) No person, after the commencement of this Act, shall hold office 

as a director, including any alternate directorship, in more than twenty companies at the same time: 

Provided  that  the  maximum  number  of  public  companies  in  which  a  person  can  be  appointed  as  a 

director shall not exceed ten. 

3[Explanation I ].— For reckoning the limit of public companies in which a person can be appointed as 
director,  directorship  in  private  companies  that  are  either  holding  or  subsidiary  company  of  a  public 
company shall be included. 

4[Explanation II.—For reckoning the limit of directorships of twenty companies, the directorship in a 

dormant company shall not be included.] 

(2) Subject to the provisions of sub-section (1), the members of a company may, by special resolution, 

specify any lesser number of companies in which a director of the company may act as directors. 

(3) Any person holding office as director in companies more than the limits as specified in                 sub-
section (1), immediately before the commencement of this Act shall, within a period of one year from such 
commencement,— 

(a) choose not more than the specified limit of those companies, as companies in which he wishes 

to continue to hold the office of director; 

(b) resign his office as director in the other remaining companies; and 

(c) intimate the choice made by him under clause (a), to each of the companies in which he was 
holding the office of director before such commencement and to the Registrar having jurisdiction in 
respect of each such company. 

(4)  Any  resignation  made  in  pursuance  of  clause  (b)  of  sub-section  (3)  shall  become  effective 

immediately on the despatch thereof to the company concerned. 

(5) No such person shall act as director in more than the specified number of companies,— 

(a) after despatching the resignation of his office as director or non-executive director thereof, in 

pursuance of clause (b) of sub-section (3); or 

(b) after the expiry of one year from the commencement of this Act, 

whichever is earlier. 

5[(6) If a person accepts an appointment as a director in violation of this section, he shall be liable to a 
penalty of two thousand rupees for each day after the first during which such violation continues, subject 
to a maximum of two lakh rupees.] 

166. Duties of directors.—(1) Subject to the provisions of this Act, a director of a company shall act 

in accordance with the articles of the company. 

1. The proviso ins. by Act 1 of 2018, s. 52 (w.e.f. 7-5-2018). 
2.  The proviso subs. by Act 1 of 2018, s. 52 (w.e.f. 7-5-2018). 
3. The Explanation renumbered as Explanation I thereof by s. 53, ibid.  (w.e.f. 9-2-2018). 
4. Ins. by s. 53, ibid. (w.e.f. 9-2-2018). 
5. Subs. by Act 29 of 2020, s. 33, for sub-section (6) (w.e.f. 21-12-2020). 

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(2) A director of a company shall act in good faith in order to promote the objects of the company for 
the  benefit  of  its  members  as  a  whole,  and  in  the  best  interests  of  the  company,  its  employees,  the 
shareholders, the community and for the protection of environment. 

(3) A director of a company shall exercise his duties with due and reasonable care, skill and diligence 

and shall exercise independent judgment. 

(4) A director of a company shall not involve in a situation in which he may have a direct or indirect 

interest that conflicts, or possibly may conflict, with the interest of the company. 

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

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

(7)  If  a  director  of  the  company  contravenes  the  provisions  of  this  section  such  director  shall  be 
punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees. 

167. Vacation of office of director.—(1) The office of a director shall become vacant in case— 

(a) he incurs any of the disqualifications specified in section 164: 

1[Provided that where he incurs disqualification under sub-section (2) of section 164, the office of 
the director shall become vacant in all the companies, other than the company which is in default under 
that sub-section]; 

(b) he absents himself from all the meetings of the Board of Directors held during a period of twelve 

months with or without seeking leave of absence of the Board; 

(c) he acts in contravention of the provisions of section 184 relating to entering into contracts or 

arrangements in which he is directly or indirectly interested; 

(d) he fails to disclose his interest in any contract or arrangement in which he is directly or indirectly 

interested, in contravention of the provisions of section 184; 

(e) he becomes disqualified by an order of a court or the Tribunal; 

(f) he is convicted by a court of any offence, whether involving moral turpitude or otherwise and 

sentenced in respect thereof to imprisonment for not less than six months: 

2[Provided that the office shall not be vacated by the director in case of orders referred to in     clauses 

(e) and (f)—  

(i) for thirty days from the date of conviction or order of disqualification;  
(ii) where an appeal or petition is preferred within thirty days as aforesaid against the conviction 
resulting  in  sentence  or  order,  until  expiry  of  seven  days  from  the  date  on  which  such  appeal  or 
petition is disposed of; or  

(iii) where any further appeal or petition is preferred against order or sentence within seven days, 

until such further appeal or petition is disposed of.] 

(g) he is removed in pursuance of the provisions of this Act; 

(h) he, having been appointed a director by virtue of his holding any office or other employment in 
the holding, subsidiary or associate company, ceases to hold such office or other employment in that 
company. 

1. The proviso ins. by Act 1 of 2018, s. 54 (w.e.f. 7-5-2018). 
2. The proviso subs. by Act 1 of 2018, s. 54 (w.e.f. 7-5-2018).   

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(2) If a person, functions as a director even when he knows that the office of director held by him has 
become vacant on account of any of the disqualifications specified in sub-section (1), he shall be punishable 
1*** with fine which shall not be less than one lakh rupees but which may extend to 2[five lakh rupees]. 

(3) Where all the directors of a company vacate their offices under any of the disqualifications specified 
in  sub-section  (1),  the  promoter  or,  in  his  absence,  the  Central  Government  shall  appoint  the  required 
number of directors who shall hold office till the directors are appointed by the company in the general 
meeting. 

(4) A private company may, by its articles, provide any other ground for the vacation of the office of a 

director in addition to those specified in sub-section (1). 

168. Resignation of director.—(1) A director may resign from his office by giving a notice in writing 
to the company and the Board shall on receipt of such notice take note of the same and the company shall 
intimate the Registrar in such manner, within such time and in such form as may be prescribed and shall 
also place the fact of such resignation in the report of directors laid in the immediately following general 
meeting by the company: 

Provided that a 3[director may also forward] a copy of his resignation along with detailed reasons for 

the resignation to the Registrar within thirty days of resignation in such manner as may be prescribed. 

(2) The resignation of a director shall take effect from the date on which the notice is received by the 

company or the date, if any, specified by the director in the notice, whichever is later: 

Provided that the director who has resigned shall be liable even after his resignation for the offences 

which occurred during his tenure. 

(3) Where all the directors of a company resign from their offices, or vacate their offices under section 
167, the promoter or, in his absence, the Central Government shall appoint the required number of directors 
who shall hold office till the directors are appointed by the company in general meeting. 

169. Removal of directors.—(1) A company may, by ordinary resolution, remove a director, not being 
a director appointed by the Tribunal under section 242, before the expiry of the period of his office after 
giving him a reasonable opportunity of being heard: 

4[Provided that an independent director re-appointed for second term under sub-section (10) of section 
149 shall be removed by the company only by passing a special resolution and after giving him a reasonable 
opportunity of being heard:] 

5[Provided further that] nothing contained in this sub-section shall apply where the company has availed 
itself of the option given to it under section 163 to appoint not less than two-thirds of the total number of 
directors according to the principle of proportional representation. 

(2) A special notice shall be required of any resolution, to remove a director under this section, or to 

appoint somebody in place of a director so removed, at the meeting at which he is removed. 

(3)  On  receipt  of  notice  of  a  resolution  to  remove  a  director  under  this  section,  the  company  shall 
forthwith send a copy thereof to the director concerned, and the director, whether or not he is a member of 
the company, shall be entitled to be heard on the resolution at the meeting. 

(4) Where notice has been given of a resolution to remove a director under this section and the director 
concerned makes with respect thereto representation in writing to the company and requests its notification 
to members of the company, the company shall, if the time permits it to do so,— 

(a)  in  any  notice  of  the  resolution  given  to  members  of  the  company,  state  the  fact  of  the 

representation having been made; and 

(b)  send  a  copy  of  the  representation  to  every  member  of  the  company  to  whom  notice  of  the 

meeting is sent (whether before or after receipt of the representation by the company), 

1. The words “with imprisonment for a term which may extend to one year or” omitted by Act 29 of 2020, s. 34 (w.e.f. 21-12-

2020). 

2. Subs. by s. 34, ibid., for “five lakh rupees, or with both” (w.e.f. 21-12-2020). 
3. Subs. by Act 1 of 2018, s. 55, for “director shall also forward” (w.e.f. 7-5-2018).  
4. The proviso ins. by Notification No. S.O. 768(E), dated 21st February, 2018 (w.e.f. 21-2-2018). 
5. Subs. by ibid., for “Provided that”(w.e.f. 21-2-2018). 

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and if a copy of the representation is not sent as aforesaid due to insufficient time or for the company’s 
default, the director may without prejudice to his right to be heard orally require that the representation 
shall be read out at the meeting: 

Provided that copy of the representation need not be sent out and the representation need not be read 
out at the meeting if, on the application either of the company or of any other person who claims to be 
aggrieved, the Tribunal is satisfied that the rights conferred by this sub-section are being abused to secure 
needless publicity for defamatory matter; and the Tribunal may order the company’s costs on the application 
to be paid in whole or in part by the director notwithstanding that he is not a party to it. 

(5) A vacancy created by the removal of a director under this section may, if he had been appointed by 
the company in general meeting or by the Board, be filled by the appointment of another director in his 
place at the meeting at which he is removed, provided special notice of the intended appointment has been 
given under sub-section (2). 

(6) A director so appointed shall hold office till the date up to which his predecessor would have held 

office if he had not been removed. 

(7) If the vacancy is not filled under sub-section (5), it may be filled as a casual vacancy in accordance 

with the provisions of this Act: 

Provided that the director who was removed from office shall not be re-appointed as a director by the 

Board of Directors. 

(8) Nothing in this section shall be taken— 

(a) as depriving a person removed under this section of any compensation or damages payable to 
him in respect of the termination of his appointment as director as per the terms of contract or terms of 
his appointment as director, or of any other appointment terminating with that as director; or 
(b) as derogating from any power to remove a director under other provisions of this Act. 

170.  Register  of  directors  and  key  managerial  personnel  and  their  shareholding.—(1)  Every 
company shall keep at its registered office a register containing such particulars of its directors and key 
managerial personnel as may be prescribed, which shall include the details of securities held by each of 
them in the company or its holding, subsidiary, subsidiary of company’s holding company or associate 
companies. 

(2) A return containing such particulars and documents as may be prescribed, of the directors and the 
key managerial personnel shall be filed with the Registrar within thirty days from the appointment of every 
director and key managerial personnel, as the case may be, and within thirty days of any change taking 
place. 

171. Members’ right to inspect.—(1) The register kept under sub-section (1) of section 170,— 

(a) shall be open for inspection during business hours and the members shall have a right to take 
extracts therefrom and copies thereof, on a request by the members, be provided to them free of cost 
within thirty days; and 

(b) shall also be kept open for inspection at every annual general meeting of the company and shall 

be made accessible to any person attending the meeting. 

(2) If any inspection as provided in clause (a) of sub-section (1) is refused, or if any copy required 
under that clause is not sent within thirty days from the date of receipt of such request, the Registrar shall 
on an application made to him order immediate inspection and supply of copies required thereunder. 

1[172. Penalty.— If a company is in default in complying with any of the provisions of this Chapter 
and for which no specific penalty or punishment is provided therein, the company and every officer of the 
company who is in default shall be liable to a penalty of fifty thousand rupees, and in case of continuing 
failure, with a further penalty of five hundred rupees for each day during which such failure continues, 
subject to a maximum of three lakh rupees in case of a company and one lakh rupees in case of an officer 
who is in default.] 

1. Subs. by Act 29 of 2020, s. 35, for section 35 (w.e.f. 21-12-2020). 

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CHAPTER XII 

MEETINGS OF BOARD AND ITS POWERS 

173. Meetings of Board.—(1) Every company shall hold the first meeting of the Board of Directors 
within thirty days of the date of its incorporation and thereafter hold a minimum number of four meetings 
of its Board of Directors every year in such a manner that not more than one hundred and twenty days shall 
intervene between two consecutive meetings of the Board: 

Provided that the Central Government may, by notification, direct that the provisions of this            sub-
section shall not apply in relation to any class or description of companies or shall apply subject to such 
exceptions, modifications or conditions as may be specified in the notification. 

(2) The participation of directors in a meeting of the Board may be either in person or through video 
conferencing  or  other  audio  visual  means,  as  may  be  prescribed,  which  are  capable  of  recording  and 
recognising the participation of the directors and of recording and storing the proceedings of such meetings 
along with date and time: 

Provided that the Central Government may, by notification, specify such matters which shall not be 

dealt with in a meeting through video conferencing or other audio visual means. 

1[Provided further that where there is quorum in a meeting through physical presence of directors, any 
other director may participate through video conferencing or other audio visual means in such meeting on 
any matter specified under the first proviso.] 

(3) A meeting of the Board shall be called by giving not less than seven days’ notice in writing to every 
director at his address registered with the company and such notice shall be sent by hand delivery or by 
post or by electronic means: 

Provided that a meeting of the Board may be called at shorter notice to transact urgent business subject 

to the condition that at least one independent director, if any, shall be present at the meeting: 

Provided further that in case of absence of independent directors from such a meeting of the Board, 
decisions taken at such a meeting shall be circulated to all the directors and shall be final only on ratification 
thereof by at least one independent director, if any. 

(4) Every officer of the company whose duty is to give notice under this section and who fails to do so 

shall be liable to a penalty of twenty-five thousand rupees. 

(5) A One Person Company, small company and dormant company shall be deemed to have complied 
with the provisions of this section if at least one meeting of the Board of Directors has been conducted in 
each half of a calendar year and the gap between the two meetings is not less than ninety days: 

Provided  that  nothing  contained  in  this  sub-section  and  in  section  174  shall  apply  to  One  Person 

Company in which there is only one director on its Board of Directors. 

174. Quorum for meetings of Board.—(1) The quorum for a meeting of the Board of Directors of a 
company hall be one-third of its total strength or two directors, whichever is higher, and the participation 
of the directors by video conferencing or by other audio visual means shall also be counted for the purposes 
of quorum under this sub-section. 

(2) The continuing directors may act notwithstanding any vacancy in the Board; but, if and so long as 
their number is reduced below the quorum fixed by the Act for a meeting of the Board, the continuing 
directors  or  director  may  act for  the  purpose of  increasing  the number  of  directors to  that fixed  for the 
quorum, or of summoning a general meeting of the company and for no other purpose. 

(3) Where at any time the number of interested directors exceeds or is equal to two-thirds of the total 
strength of the Board of Directors, the number of directors who are not interested directors and present at 
the meeting, being not less than two, shall be the quorum during such time. 

1. The proviso ins. by Act 1 of 2018, s. 56 (w.e.f. 7-5-2018).  

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Explanation.—For the purposes of this sub-section, “interested director” means a director within the 

meaning of sub-section (2) of section 184. 

(4) Where a meeting of the Board could not be held for want of quorum, then, unless the articles of the 
company otherwise provide, the meeting shall automatically stand adjourned to the same day at the same 
time and place in the next week or if that day is a national holiday, till the next succeeding day, which is 
not a national holiday, at the same time and place. 

Explanation.—For the purposes of this section,— 

(i) any fraction of a number shall be rounded off as one; 

(ii) “total strength” shall not include directors whose places are vacant. 

175.  Passing  of  resolution  by  circulation.—(1)  No  resolution  shall  be  deemed  to  have  been  duly 
passed by the Board or by a committee thereof by circulation, unless the resolution has been circulated in 
draft, together with the necessary papers, if any, to all the directors, or members of the committee, as the 
case may be, at their addresses registered with the company in India by hand delivery or by post or by 
courier, or through such electronic means as may be prescribed and has been approved by a majority of the 
directors or members, who are entitled to vote on the resolution: 

Provided that, where not less than one-third of the total number of directors of the company for the time 
being require that any resolution under circulation must be decided at a meeting, the chairperson shall put 
the resolution to be decided at a meeting of the Board. 

(2)  A  resolution  under  sub-section  (1)  shall  be  noted  at  a  subsequent  meeting  of  the  Board  or  the 

committee thereof, as the case may be, and made part of the minutes of such meeting. 

176. Defects in appointment of directors not to invalidate actions taken.—No act done by a person 
as  a  director  shall  be  deemed  to  be  invalid,  notwithstanding  that  it  was  subsequently  noticed  that  his 
appointment  was invalid  by  reason  of  any  defect  or disqualification  or had  terminated  by  virtue  of  any 
provision contained in this Act or in the articles of the company: 

Provided that nothing in this section shall be deemed to give validity to any act done by the director 

after his appointment has been noticed by the company to be invalid or to have terminated. 

177. Audit Committee.—(1) The Board of Directors of 1[every listed public company] and such other 

class or classes of companies, as may be prescribed, shall constitute an Audit Committee. 

(2)  The  Audit  Committee  shall  consist  of  a  minimum  of  three  directors  with  independent  directors 

forming a majority: 

Provided that majority of members of Audit Committee including its Chairperson shall be persons with 

ability to read and understand, the financial statement. 

(3) Every Audit Committee of a company existing immediately before the commencement of this Act 

shall, within one year of such commencement, be reconstituted in accordance with sub-section (2). 

(4) Every Audit Committee shall act in accordance with the terms of reference specified in writing by 

the Board which shall, inter alia, include,— 

(i) the recommendation for appointment, remuneration and terms of appointment of auditors of the 

company; 

(ii) review and monitor the auditor’s independence and performance, and effectiveness of audit 

process; 

(iii) examination of the financial statement and the auditors’ report thereon; 

(iv) approval or any subsequent modification of transactions of the company with related parties: 

1. Subs. by Act 1 of 2018, s. 57, for “every listed company” (w.e.f. 7-5-2018).  

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1[Provided that the Audit Committee may make omnibus approval for related party transactions 

proposed to be entered into by the company subject to such conditions as may be prescribed;] 

2[Provided further that in case of transaction, other than transactions referred to in section 188, and 
where Audit Committee does not approve the transaction, it shall make its recommendations to the 
Board:  

Provided also that in case any transaction involving any amount not exceeding one crore rupees is 
entered  into  by  a  director  or  officer  of  the  company  without  obtaining  the  approval  of  the  Audit 
Committee  and  it  is  not  ratified  by  the  Audit  Committee  within  three  months  from  the  date  of  the 
transaction,  such  transaction  shall  be  voidable  at  the  option  of  the  Audit  Committee  and  if  the 
transaction is with the related party to any director or is authorised by any other director, the director 
concerned shall indemnify the company against any loss incurred by it:  

Provided  also  that  the  provisions  of  this  clause  shall  not  apply  to  a  transaction,  other  than  a 
transaction referred to in section 188, between a holding company and its wholly owned subsidiary 
company.] 

(v) scrutiny of inter-corporate loans and investments; 

(vi) valuation of undertakings or assets of the company, wherever it is necessary; 

(vii) evaluation of internal financial controls and risk management systems; 

(viii) monitoring the end use of funds raised through public offers and related matters. 

(5) The Audit Committee may call for the comments of the auditors about internal control systems, the 
scope of audit, including the observations of the auditors and review of financial statement before their 
submission to the Board and may also discuss any related issues with the internal and statutory auditors and 
the management of the company. 

(6) The Audit Committee shall have authority to investigate into any matter in relation to the items 
specified in sub-section (4) or referred to it by the Board and for this purpose shall have power to obtain 
professional advice from external sources and have full access to information contained in the records of 
the company. 

(7) The auditors of a company and the key managerial personnel shall have a right to be heard in the 
meetings of the Audit Committee when it considers the auditor’s report but shall not have the right to vote. 

(8) The Board’s report under sub-section (3) of section 134 shall disclose the composition of an Audit 
Committee and where the Board had not accepted any recommendation of the Audit Committee, the same 
shall be disclosed in such report along with the reasons therefor. 

(9) Every listed company or such class or classes of companies, as may be prescribed, shall establish a 
vigil  mechanism  for  directors  and  employees  to  report  genuine  concerns  in  such  manner  as  may  be 
prescribed. 

(10)  The  vigil  mechanism  under  sub-section  (9)  shall  provide  for  adequate  safeguards  against 
victimisation of persons who use such mechanism and make provision for direct access to the chairperson 
of the Audit Committee in appropriate or exceptional cases: 

Provided that the details of establishment of such mechanism shall be disclosed by the company on its 

website, if any, and in the Board’s report. 

178.  Nomination 

and  Remuneration  Committee 

and  Stakeholders  Relationship               

Committee.—(1) The Board of Directors of 3[every listed public company] and such other class or classes 
of  companies,  as  may  be  prescribed  shall  constitute  the  Nomination  and  Remuneration  Committee 
consisting of three or more non-executive directors out of which not less than one-half shall be independent 
directors: 

1. The proviso ins. by Act 21 of 2015, s. 14 (w.e.f. 14-12-2015). 
2. Ins. by Act 1 of 2018, s. 57 (w.e.f. 7-5-2018).  
3. Subs. by Act 1 of 2018, s. 58, for “every listed company” (w.e.f. 7-5-2018). 

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Provided that the chairperson of the company (whether executive or non-executive) may be appointed 

as a member of the Nomination and Remuneration Committee but shall not chair such Committee. 

(2) The Nomination and Remuneration Committee shall identify persons who are qualified to become 
directors  and  who  may  be  appointed  in  senior  management  in  accordance  with  the  criteria  laid  down, 
recommend  to  the  Board  their  appointment  and  removal  and  1[shall  specify  the  manner  for  effective 
evaluation of performance of Board, its committees and individual directors to be carried out either by the 
Board, by the Nomination and Remuneration Committee or by an independent external agency and review 
its implementation and compliance]. 

(3)  The  Nomination  and  Remuneration  Committee  shall  formulate  the  criteria  for  determining 
qualifications, positive attributes and independence of a director and recommend to the Board a policy, 
relating to the remuneration for the directors, key managerial personnel and other employees. 

(4)  The  Nomination  and  Remuneration  Committee  shall,  while  formulating  the  policy  under                 

sub-section (3) ensure that— 

(a) the  level  and  composition  of  remuneration is  reasonable  and  sufficient to attract, retain  and 

motivate directors of the quality required to run the company successfully; 

(b)  relationship  of  remuneration  to  performance  is  clear  and  meets  appropriate  performance 

benchmarks; and 

(c) remuneration to directors, key managerial personnel and senior management involves a balance 
between fixed and incentive pay reflecting short and long-term performance objectives appropriate to 
the working of the company and its goals: 

2[Provided that such policy shall be placed on the website of the company, if any, and the salient 
features of the policy and changes therein, if any, along with the web address of the policy, if any, shall 
be disclosed in the Board's report.] 

(5)  The  Board  of  Directors  of  a  company  which  consists  of  more  than  one  thousand  shareholders, 
debenture-holders, deposit-holders and any other security holders at anytime during a financial year shall 
constitute a Stakeholders Relationship Committee consisting of a chairperson who shall be a                non-
executive director and such other members as may be decided by the Board. 

(6)  The  Stakeholders  Relationship  Committee  shall  consider  and  resolve  the  grievances  of  security 

holders of the company. 

(7) The chairperson of each of the committees constituted under this section or, in his absence, any 
other member of the committee authorised by him in this behalf shall attend the general meetings of the 
company. 

(8) In case of any contravention of the provisions of section 177 and this section, the company 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 shall be  3[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 one lakh rupees]: 

Provided  that  4[inability  to  resolve  or  consider  any  grievance]  by  the  Stakeholders  Relationship 

Committee in good faith shall not constitute a contravention of this section. 

Explanation.—The  expression  “senior  management”  means  personnel  of  the  company  who  are 
members  of  its  core  management  team  excluding  Board  of  Directors  comprising  all  members  of 
management one level below the executive directors, including the functional heads. 

179. Powers of Board.—(1) The Board of Directors of a company shall be entitled to exercise all such 

powers, and to do all such acts and things, as the company is authorised to exercise and do: 

1. Subs. by s. 58, ibid., for “shall carry out evaluation of every director’s performance” (w.e.f. 7-5-2018). 
2. Subs. by Act 1 of 2018, s. 58, for the proviso (w.e.f. 7-5-2018). 
3. Subs. by Act 29 of 2020, s. 36, for certain words (w.e.f. 21-12-2020). 
4. Subs. by Act 1 of 2018, s. 58, for “non-consideration of resolution of any grievance” (w.e.f. 7-5-2018). 

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Provided that in exercising such power or doing such act or thing, the Board shall be subject to the 
provisions contained in that behalf in this Act, or in the memorandum or articles, or in any regulations not 
inconsistent therewith and duly made thereunder, including regulations made by the company in general 
meeting: 

Provided further that the Board shall not exercise any power or do any act or thing which is directed or 
required, whether under this Act or by the memorandum or articles of the company or otherwise, to be 
exercised or done by the company in general meeting. 

(2) No regulation made by the company in general meeting shall invalidate any prior act of the Board 

which would have been valid if that regulation had not been made. 

(3) The Board of Directors of a company shall exercise the following powers on behalf of the company 

by means of resolutions passed at meetings of the Board, namely:— 

(a) to make calls on shareholders in respect of money unpaid on their shares; 

(b) to authorise buy-back of securities under section 68; 

(c) to issue securities, including debentures, whether in or outside India; 

(d) to borrow monies; 

(e) to invest the funds of the company; 

(f) to grant loans or give guarantee or provide security in respect of loans; 

(g) to approve financial statement and the Board’s report; 

(h) to diversify the business of the company; 

(i) to approve amalgamation, merger or reconstruction; 

(j) to take over a company or acquire a controlling or substantial stake in another company; 

(k) any other matter which may be prescribed: 

Provided  that  the  Board  may,  by  a  resolution  passed  at  a  meeting,  delegate  to  any  committee  of 
directors, the managing director, the manager or any other principal officer of the company or in the case 
of a branch office of the company, the principal officer of the branch office, the powers specified in clauses 
(d) to (f) on such conditions as it may specify: 

Provided further that the acceptance by a banking company in the ordinary course of its business of 
deposits of money from the public repayable on demand or otherwise and withdraw able by cheque, draft, 
order  or  otherwise,  or  the  placing  of  monies  on  deposit  by  a  banking  company  with  another  banking 
company on such conditions as the Board may prescribe, shall not be deemed to be a borrowing of monies 
or, as the case may be, a making of loans by a banking company within the meaning of this section. 

Explanation I.—Nothing in clause (d) shall apply to borrowings by a banking  company from other 
banking  companies  or  from  the  Reserve  Bank  of  India,  the  State  Bank  of  India  or  any  other  banks 
established by or under any Act. 

Explanation  II.—In  respect  of  dealings  between  a  company  and  its  bankers,  the  exercise  by  the 
company of the power specified in clause (d) shall mean the arrangement made by the company with its 
bankers for the borrowing of money by way of overdraft or cash credit or otherwise and not the actual day-
to-day operation on overdraft, cash credit or other accounts by means of which the arrangement so made is 
actually availed of. 

(4) Nothing in this section shall be deemed to affect the right of the company in general meeting to 
impose  restrictions  and  conditions  on  the  exercise  by  the  Board  of  any  of  the  powers  specified  in  this 
section. 

180. Restrictions on powers of Board.—(1) The Board of Directors of a company shall exercise the 

following powers only with the consent of the company by a special resolution, namely:— 

121 

 
(a) to sell, lease or otherwise dispose of the whole or substantially the whole of the undertaking of 
the company or where the company owns more than one undertaking, of the whole or substantially the 
whole of any of such undertakings. 

Explanation.—For the purposes of this clause,— 

(i) “undertaking” shall mean an undertaking in which the investment of the company exceeds 
twenty per cent. of its net worth as per the audited balance sheet of the preceding financial year or 
an undertaking which generates twenty per cent. of the total income of the company during the 
previous financial year; 

(ii) the expression “substantially the whole of the undertaking” in any financial year shall mean 
twenty per cent. or more of the value of the undertaking as per the audited balance sheet of the 
preceding financial year; 

(b) to invest otherwise in trust securities the amount of compensation received by it as a result of 

any merger or amalgamation; 

(c) to borrow money, where the money to be borrowed, together with the money already borrowed 
by  the  company  will  exceed  aggregate  of  its  1[paid-up  share  capital,  free  reserves  and  securities 
premium], apart from temporary loans obtained from the company’s bankers in the ordinary course of 
business: 

Provided  that  the  acceptance  by  a  banking  company,  in  the  ordinary  course  of  its  business,  of 
deposits of money from the public, repayable on demand or otherwise, and withdraw able by cheque, 
draft, order or otherwise, shall not be deemed to be a borrowing of monies by the banking company 
within the meaning of this clause. 

Explanation.—For  the  purposes  of  this  clause,  the  expression  “temporary  loans”  means  loans 
repayable on demand or within six months from the date of the loan such as short-term, cash credit 
arrangements, the discounting of bills and the issue of other short-term loans of a seasonal character, 
but does not include loans raised for the purpose of financial expenditure of a capital nature; 

(d) to remit, or give time for the repayment of, any debt due from a director. 

(2) Every special resolution passed by the company in general meeting in relation to the exercise of the 
powers referred to in clause (c) of sub-section (1) shall specify the total amount up to which monies may 
be borrowed by the Board of Directors. 

(3) Nothing contained in clause (a) of sub-section (1) shall affect— 

(a) the  title of a  buyer  or other  person  who  buys  or takes  on  lease  any  property,  investment  or 

undertaking as is referred to in that clause, in good faith; or 

(b) the sale or lease of any property of the company where the ordinary business of the company 

consists of, or comprises, such selling or leasing. 

(4)  Any  special  resolution passed  by  the  company  consenting  to the transaction  as  is  referred  to in 
clause (a) of sub-section (1) may stipulate such conditions as may be specified in such resolution, including 
conditions  regarding  the  use,  disposal  or  investment  of  the  sale  proceeds  which  may  result  from  the 
transactions: 

Provided that this sub-section shall not be deemed to authorise the company to effect any reduction in 

its capital except in accordance with the provisions contained in this Act. 

(5) No debt incurred by the company in excess of the limit imposed by clause (c) of sub-section (1) 
shall be valid or effectual, unless the lender proves that he advanced the loan in good faith and without 
knowledge that the limit imposed by that clause had been exceeded. 

181. Company to contribute to bona fide and charitable funds, etc.—The Board of Directors of a 

company may contribute to bona fide charitable and other funds: 

1. Subs. by Act 1 of 2018, s. 59, for “paid-up share capital and free reserves” (w.e.f. 9-2-2018). 

122 

 
                                                           
Provided  that  prior  permission  of  the  company  in  general  meeting  shall  be  required  for  such 
contribution in case any amount the aggregate of which, in any financial year, exceed five per cent. of its 
average net profits for the three immediately preceding financial years. 

182.  Prohibitions  and  restrictions  regarding  political  contributions.—(1)  Notwithstanding 
anything contained in any other provision of this Act, a company, other than a Government company and 
a  company  which  has  been  in  existence  for  less  than  three  financial  years,  may  contribute  any  amount 
directly or indirectly to any political party: 

* 

1* 
Provided 2*** that no such contribution shall be made by a company unless a resolution authorising 
the making of such contribution is passed at a meeting of the Board of Directors and such resolution shall, 
subject to the other provisions of this section, be deemed to be justification in law for the making  3*** of 
the contribution authorised by it. 
(2) Without prejudice to the generality of the provisions of sub-section (1),— 

* 

* 

* 

(a) a donation or subscription or payment caused to be given by a company on its behalf or on its 
account to a person who, to its knowledge, is carrying on any activity which, at the time at which such 
donation or subscription or payment was given or made, can reasonably be regarded as likely to affect 
public  support  for  apolitical  party  shall  also  be  deemed  to  be  contribution  of  the  amount  of  such 
donation, subscription or payment to such person for a political purpose; 

(b) the amount of expenditure incurred, directly or indirectly, by a company on an advertisement 
in any publication, being a publication in the nature of a souvenir, brochure, tract, pamphlet or the like, 
shall also be deemed,— 

(i) where such publication is by or on behalf of a political party, to be a contribution of such 

amount to such political party, and 

(ii) where such publication is not by or on behalf of, but for the advantage of a political party, 

to be a contribution for a political purpose. 

4[(3) Every company shall disclose in its profit and loss account the total amount contributed by it under 

this section during the financial year to which the account relates. 

(3A) Notwithstanding anything contained in sub-section (1), the contribution under this section shall not 
be made except by an account payee cheque drawn on a bank or an account payee bank draft or use of 
electronic clearing system through a bank account: 

Provided that a company may make contribution through any instrument, issued pursuant to any scheme 

notified under any law for the time being in force, for contribution to the political parties.] 

(4) If a company makes any contribution in contravention of the provisions of this section, the company 
shall be punishable with fine which may extend to five times the amount so contributed and every officer 
of the company who is in default shall be punishable with imprisonment for a term which may extend to 
six months and with fine which may extend to five times the amount so contributed. 

Explanation.—For the purposes of this section, “political party” means a political party registered under 

section 29A of the Representation of the People Act, 1951 (43 of 1951). 

183.  Power  of  Board  and  other  persons  to  make  contributions  to  national  defence  fund,              

etc.—(1) The Board of Directors of any company or any person or authority exercising the powers of the 
Board of Directors of a company, or of the company in general meeting, may, notwithstanding anything 
contained in sections 180, 181 and section 182 or any other provision of this Act or in the memorandum, 
articles  or  any  other  instrument  relating  to  the  company,  contribute  such  amount  as  it  thinks  fit  to  the 
National Defence Fund or any other Fund approved by the Central Government for the purpose of national 
defence. 

(2) Every company shall disclose in its profits and loss account the total amount or amounts contributed 

by it to the Fund referred to in sub-section (1) during the financial year to which the amount relates. 

1. The proviso omitted by Act 7 of 2017, s. 154 (w.e.f. 31-3-2017).  
2. The word “further” omitted by Act 7 of 2017, s. 154 (w.e.f. 31-3-2017). 
3. The words “and the acceptance” omitted by s. 154, ibid. (w.e.f. 31-3-2017). 
4. Subs. by s. 154, ibid. for sub-section (3) (w.e.f.  31-3-2017). 

123 

 
 
 
 
 
 
 
 
 
 
                                                           
184. Disclosure of interest by director.—(1) Every director shall at the first meeting of the Board in 
which he participates as a director and thereafter at the first meeting of the Board in every financial year or 
whenever there is any change in the disclosures already made, then at the first Board meeting held after 
such change, disclose his concern or interest in any company or companies or bodies corporate, firms, or 
other association of individuals which shall include the shareholding, in such manner as may be prescribed. 

(2)  Every  director  of  a  company  who  is  in  any  way,  whether  directly  or  indirectly,  concerned  or 
interested in a contract or arrangement or proposed contract or arrangement entered into or to be entered 
into— 

(a)  with  a  body  corporate in  which  such  director  or  such  director  in  association  with  any  other 
director, holds more than two per cent. shareholding of that body corporate, or is a promoter, manager, 
Chief Executive Officer of that body corporate; or 

(b) with a firm or other entity in which, such director is a partner, owner or member, as the case 

may be, 

shall disclose the nature of his concern or interest at the meeting of the Board in which the contract or 
arrangement is discussed and shall not participate in such meeting: 

Provided that where any director who is not so concerned or interested at the time of entering into such 
contract or arrangement, he shall, if he becomes concerned or interested after the contract or arrangement 
is entered into, disclose his concern or interest forthwith when he becomes concerned or interested or at the 
first meeting of the Board held after he becomes so concerned or interested. 

(3) A contract or arrangement entered into by the company without disclosure under sub-section (2) or 
with participation by a director who is concerned or interested in any way, directly or indirectly, in the 
contract or arrangement, shall be voidable at the option of the company. 

(4) If a director of the company contravenes the provisions of sub-section (1) or sub-section (2), such 

director shall be 1[liable to a penalty of one lakh rupees]. 

(5) Nothing in this section— 

(a) shall be taken to prejudice the operation of any rule of law restricting a director of a company 

from having any concern or interest in any contract or arrangement with the company; 

2[(b)  shall  apply  to  any  contract  or  arrangement  entered  into  or  to  be  entered  into  between  two 
companies or between one or more companies and one or more bodies corporate where any of the directors 
of the one company or body corporate or two or more of them together holds or hold not more than two per 
cent. of the paid-up share capital in the other company or the body corporate.] 

3[185.  Loans  to  directors,  etc.—(1)  No  company  shall,  directly  or  indirectly,  advance  any  loan, 
including  any  loan  represented  by  a  book  debt  to,  or  give  any  guarantee  or  provide  any  security  in 
connection with any loan taken by,—  

(a) any director of company, or of a company which is its holding company or any partner or relative 

of any such director; or 

(b) any firm in which any such director or relative is a partner.  

(2)  A  company  may  advance  any  loan  including  any  loan  represented  by  a  book  debt,  or  give  any 
guarantee or provide any security in connection with any loan taken by any person in whom any of  the 
director of the company is interested, subject to the condition that— 

(a) a special resolution is passed by the company in general meeting:  

Provided that the explanatory statement to the notice for the relevant general meeting shall disclose 
the full particulars of the loans given, or guarantee given or security provided and the purpose for which 

1. Subs. by Act 29 of 2020, s. 37, for certain words (w.e.f. 21-12-2020). 
2. Subs. by Act 1 of 2018, s. 60, for clause (b) (w.e.f. 9-2-2018). 
3. Subs. by s. 61, ibid., for section 185 (w.e.f. 7-5-2018).  

124 

 
                                                           
the loan or guarantee or security is proposed to be utilised by the recipient of the loan or guarantee or 
security and any other relevant fact; and 

(b) the loans are utilised by the borrowing company for its principal business activities.   

Explanation.—For  the  purposes  of  this sub-section,  the  expression “any  person  in  whom  any  of  the 

director of the company is interested” means—  

(a) any private company of which any such director is a director or member; 

(b) any body corporate at a general meeting of which not less than twenty-five per cent. of the total 
voting power may be exercised or controlled by any such director, or by two or more such directors, 
together; or  

(c) any body corporate, the Board of directors, managing director or manager, whereof is accustomed 
to act in accordance with the directions or instructions of the Board, or of any director or directors, of 
the lending company. 

(3) Nothing contained in sub-sections (1) and (2) shall apply to—  

(a) the giving of any loan to a managing or whole-time director—  

(i) as a part of the conditions of service extended by the company to all its employees; or 

(ii) pursuant to any scheme approved by the members by a special resolution; or  

(b) a company which in the ordinary course of its business provides loans or gives guarantees or 
securities for the due repayment of any loan and in respect of such loans an interest is charged at a rate 
not less than the rate of prevailing yield of one year, three years, five years or ten years Government 
security closest to the tenor of the loan; or 

 (c) any loan made by a holding company to its wholly owned subsidiary company or any guarantee 
given  or  security  provided  by  a  holding  company  in  respect  of  any  loan  made  to  its  wholly  owned 
subsidiary company; or 

 (d) any guarantee given or security provided by a holding company in respect of loan made by any 

bank or financial institution to its subsidiary company: 

Provided that the loans made under clauses (c) and (d) are utilised by the subsidiary company for its 

principal business activities. 

(4) If any loan is advanced or a guarantee or security is given or provided or utilised in contravention 

of the provisions of this section,—  

(i) the company shall be punishable with fine which shall not be less than five lakh rupees but which 

may extend to twenty-five lakh rupees; 

(ii) every officer of the company who is in default shall be punishable with imprisonment for a term 
which may extend to six months or with fine which shall not be less than five lakh rupees but which 
may extend to twenty-five lakh rupees; and 

 (iii) the director or the other person to whom any loan is advanced or guarantee or security is given 
or  provided in connection with any  loan  taken by  him  or  the  other  person,  shall  be  punishable  with 
imprisonment which may extend to six months or with fine which shall not be less than five lakh rupees 
but which may extend to twenty-five lakh rupees, or with both.] 

186. Loan and investment by company.—(1) Without prejudice to the provisions contained in this 
Act, a company shall unless otherwise prescribed, make investment through not more than two layers of 
investment companies: 

Provided that the provisions of this sub-section shall not affect,— 

(i) a company from acquiring any other company incorporated in a country outside India if such 

other company has investment subsidiaries beyond two layers as per the laws of such country; 

125 

 
(ii) a subsidiary company from having any investment subsidiary for the purposes of meeting the 
requirements under any law or under any rule or regulation framed under any law for the time being in 
force. 

(2) No company shall directly or indirectly — 

(a) give any loan to any person or other body corporate; 

(b) give any guarantee or provide security in connection with a loan to any other body corporate or 

person; and 

(c)  acquire  by  way  of  subscription,  purchase  or  otherwise,  the  securities  of  any  other  body 

corporate, 

exceeding sixty per cent. of its paid-up share capital, free reserves and securities premium account or one 
hundred per cent. of its free reserves and securities premium account, whichever is more. 

1[Explanation.—For the purposes of this sub-section, the word “person” does not include any individual 

who is in the employment of the company.] 

2[(3) Where the aggregate of the loans and investment so far made, the amount for which guarantee or 
security so far provided to or in all other bodies corporate along with the investment, loan, guarantee or 
security proposed to be made or given by the Board, exceed the limits specified under sub-section (2), no 
investment or loan shall be made or guarantee shall be given or security shall be provided unless previously 
authorised by a special resolution passed in a general meeting:  

Provided that where a loan or guarantee is given or where a security has been provided by a company 
to its wholly owned subsidiary company or a joint venture company, or acquisition is made by a holding 
company, by way of subscription, purchase or otherwise of, the securities of its wholly owned subsidiary 
company, the requirement of this sub-section shall not apply:   

Provided further that the company shall disclose the details of such loans or guarantee or security or 

acquisition in the financial statement as provided under sub-section (4).] 

 (4) The company shall disclose to the members in the financial statement  the full particulars of the 
loans given, investment made or guarantee given or security provided and the purpose for which the loan 
or guarantee or security is proposed to be utilised by the recipient of the loan or guarantee or security. 

(5)  No investment shall  be  made  or  loan  or  guarantee  or  security  given  by  the company  unless  the 
resolution sanctioning it is passed at a meeting of the Board with the consent of all the directors present at 
the  meeting  and  the prior approval  of  the public  financial institution  concerned  where  any  term  loan is 
subsisting, is obtained: 

Provided that prior approval of a public financial institution shall not be required where the aggregate 
of the loans and investments so far made, the amount for which guarantee or security so far provided to or 
in all other bodies corporate, along with the investments, loans, guarantee or security proposed to be made 
or given does not exceed the limit as specified in sub-section (2), and there is no default in repayment of 
loan instalments or payment of interest thereon as per the terms and conditions of such loan to the public 
financial institution. 

(6) No company, which is registered under section 12 of the Securities and Exchange Board of India 
Act, 1992 (15 of 1992) and covered under such class or classes of companies as may be prescribed, shall 
take inter-corporate loan or deposits exceeding the prescribed limit and such company shall furnish in its 
financial statement the details of the loan or deposits. 

(7) No loan shall be given under this section at a rate of interest lower than the prevailing yield of one 

year, three year, five year or ten year Government Security closest to the tenor of the loan. 

1. Ins. by Act 1 of 2018, s. 62 (w.e.f. 7-5-2018).  
2. Subs. by s. 62, ibid., for sub-section (3) (w.e.f. 7-5-2018).  

126 

 
                                                           
(8)  No  company  which  is  in  default  in  the  repayment  of  any  deposits  accepted  before  or  after  the 
commencement of this Act or in payment of interest thereon, shall give any loan or give any guarantee or 
provide any security or make an acquisition till such default is subsisting. 

(9) Every company giving loan or giving a guarantee or providing security or making an acquisition 
under this section shall keep a register which shall contain such particulars and shall be maintained in such 
manner as may be prescribed. 

(10) The register referred to in sub-section (9) shall be kept at the registered office of the company and 

— 

(a) shall be open to inspection at such office; and 

(b) extracts may be taken therefrom by any member, and copies thereof may be furnished to any 

member of the company on payment of such fees as may be prescribed. 

1[(11) Nothing contained in this section, except sub-section (1), shall apply—  

(a) to any loan made, any guarantee given or any security provided or any investment made by a 
banking company, or an insurance company, or a housing finance company in the ordinary course of its 
business, or a company established with the object of and engaged in the business of financing industrial 
enterprises, or of providing infrastructural facilities; 

 (b) to any investment—  

(i) made by an investment company;  

(ii) made in shares allotted in pursuance of clause (a) of sub-section (1) of section 62 or in shares 

allotted in pursuance of rights issues made by a body corporate;  

(iii) made, in respect of investment or lending activities, by a non-banking financial company 
registered  under  Chapter  III-B  of  the  Reserve  Bank  of  India  Act,  1934  (2  of  1934)  and  whose 
principal business is acquisition of securities.] 

 (12) The Central Government may make rules for the purposes of this section. 

(13) If a company contravenes the provisions of this section, the company shall be punishable with fine 
which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees and 
every officer of the company who is in default shall be punishable with imprisonment for a term which may 
extend to two years and with fine which shall not be less than twenty-five thousand rupees but which may 
extend to one lakh rupees. 

Explanation.—For the purposes of this section,— 

(a)  the  expression  “investment  company”  means  a  company  whose  principal  business  is  the 
acquisition of shares, debentures or other securities 2[and a company will be deemed to be principally 
engaged in the business of acquisition of shares, debentures or other securities, if its assets in the form 
of investment in shares, debentures or other securities constitute not less than fifty per cent. of its total 
assets, or if its income derived from investment business constitutes not less than fifty per cent. as a 
proportion of its gross income.]; 

(b) the expression “infrastructure facilities” means the facilities specified in Schedule VI. 

187. Investments of company to be held in its own name.—(1) All investments made or held by a 

company in any property, security or other asset shall be made and held by it in its own name: 

Provided that the company may hold any shares in its subsidiary company in the name of any nominee 
or  nominees  of  the  company,  if  it  is  necessary  to  do  so,  to  ensure  that  the  number  of  members  of  the 
subsidiary company is not reduced below the statutory limit. 

(2) Nothing in this section shall be deemed to prevent a company— 

1. Subs. by Act 1 of 2018, s. 62, for sub-section (11)  (w.e.f. 7-5-2018). 
2. Ins. by Act 1 of 2018,  s. 62 (w.e.f. 7-5-2018).  

127 

 
                                                           
(a) from depositing with a bank, being the bankers of the company, any shares or securities for the 

collection of any dividend or interest payable thereon; or 

(b) from depositing with, or transferring to, or holding in the name of, the State Bank of India or a 
scheduled bank, being the bankers of the company, shares or securities, in order to facilitate the transfer 
thereof: 

Provided that if within a period of six months from the date on which the shares or securities are 
transferred by the company to, or are first held by the company in the name of, the State Bank of India 
or a scheduled bank as aforesaid, no transfer of such shares or securities takes place, the company shall, 
as soon as practicable after the expiry of that period, have the shares or securities re-transferred to it 
from the State Bank of India or the scheduled bank or, as the case may be, again hold the shares or 
securities in its own name; or 

(c) from depositing with, or transferring to, any person any shares or securities, by way of security 
for  the  repayment  of  any  loan  advanced  to  the  company  or  the  performance  of  any  obligation 
undertaken by it; 

(d) from holding investments in the name of a depository when such investments are in the form of 

securities held by the company as a beneficial owner. 

(3) Where in pursuance of clause (d) of sub-section (2), any shares or securities in which investments 
have been made by a company are not held by it in its own name, the company shall maintain a register 
which shall contain such particulars as may be prescribed and such register shall be open to inspection by 
any member or debenture-holder of the company without any charge during business hours subject to such 
reasonable restrictions as the company may by its articles or in general meeting impose. 

1[(4)  If a company is in default in complying with the provisions of this section, 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.] 

188. Related party transactions.— (1) Except with the consent of the Board of Directors given by a 
resolution at a meeting of the Board and subject to such conditions as may be prescribed, no company shall 
enter into any contract or arrangement with a related party with respect to— 

(a) sale, purchase or supply of any goods or materials; 

(b) selling or otherwise disposing of, or buying, property of any kind; 

(c) leasing of property of any kind; 

(d) availing or rendering of any services; 

(e) appointment of any agent for purchase or sale of goods, materials, services or property; 

(f) such related party's appointment to any office or place of profit in the company, its subsidiary 

company or associate company; and 

(g) underwriting the subscription of any securities or derivatives thereof, of the company: 

Provided that no contract or arrangement, in the case of a company having a paid-up share capital of 
not less than such amount, or transactions exceeding such sums, as may be prescribed, shall be entered into 
except with the prior approval of the company by a2[resolution]: 

Provided  further  that  no  member  of  the  company  shall  vote  on  such  1[resolution],  to  approve  any 

contract or arrangement which may be entered into by the company, if such member is a related party: 

3[Provided also that nothing contained in the second proviso shall apply to a company in which ninety 

per cent. or more members, in number, are relatives of promoters or are related parties:] 

1. Subs. by Act 29 of 2020, s. 38, for sub-section (4) (w.e.f. 21-12-2020). 
2. Subs. by Act 21 of 2015, s. 16, for “special resolution” (w.e.f. 29-5-2015). 
3. The proviso ins. by Act 1 of 2018, s. 63 (w.e.f. 9-2-2018). 

128 

 
                                                           
Provided  also  that  nothing  in  this  sub-section  shall  apply  to  any  transactions  entered  into  by  the 
company in its ordinary course of business other than transactions which are not on an arm’s length basis: 

1[Provided also that the requirement of passing the resolution under first proviso shall not be applicable 
for transactions entered into between a holding company and its wholly owned subsidiary whose accounts 
are consolidated with such holding company and placed before the shareholders at the general meeting for 
approval.] 

Explanation.— In this sub-section,— 

(a) the expression “office or place of profit” means any office or place— 

(i) where such office or place is held by a director, if the director holding it receives from the 
company anything by way of remuneration over and above the remuneration to which he is entitled 
as  director,  by  way  of  salary,  fee,  commission,  perquisites,  any  rent-free  accommodation,  or 
otherwise; 

(ii) where such office or place is held by an individual other than a director or by any firm, 
private company or other body corporate, if the individual, firm, private company or body corporate 
holding it receives from the company anything by way of remuneration, salary, fee, commission, 
perquisites, any rent-free accommodation, or otherwise; 

(b) the expression “arm’s length transaction” means a transaction between two related parties that 

is conducted as if they were unrelated, so that there is no conflict of interest. 

(2) Every contract or arrangement entered into under sub-section (1) shall be referred to in the Board’s 

report to the shareholders along with the justification for entering into such contract or arrangement. 

(3) Where any contract or arrangement is entered into by a director or any other employee, without 
obtaining the consent of the Board or approval by a 1[resolution] in the general meeting under                  sub-
section (1) and if it is not ratified by the Board or, as the case may be, by the shareholders at a meeting 
within three months from the date on which such contract or arrangement was entered into, such contract 
or arrangement 2[shall be voidable at the option of the Board or, as the case may be, of the shareholders] 
and  if  the  contract  or  arrangement  is  with  a related party  to  any  director,  or is  authorised by  any  other 
director, the directors concerned shall indemnify the company against any loss incurred by it. 

(4)  Without  prejudice  to  anything  contained  in  sub-section  (3),  it  shall  be  open  to  the  company  to 
proceed against a director or any other employee who had entered into such contract or arrangement in 
contravention of the provisions of this section for recovery of any loss sustained by it as a result of such 
contract or arrangement. 

(5) Any director or any other employee of a company, who had entered into or authorized the contract 

or arrangement in violation of the provisions of this section shall,— 

(i) in case of listed company, be 3[liable to a penalty of twenty-five lakh rupees]; and 
(ii) in case of any other company, be 4[liable to a penalty of five lakh rupees]]. 

189. Register of contracts or arrangements in which directors are interested.—(1) Every company 
shall keep one or more registers giving separately the particulars of all contracts or arrangements to which 
sub-section (2) of section 184 or section 188 applies, in such manner and containing such particulars as 
may be prescribed and after entering the particulars, such register or registers shall be placed before the 
next meeting of the Board and signed by all the directors present at the meeting. 

(2) Every director or key managerial personnel shall, within a period of thirty days of his appointment, 
or relinquishment of his office, as the case may be, disclose to the company the particulars specified in sub-
section (1) of section 184 relating to his concern or interest in the other associations which are required to 
be included in the register under that sub-section or such other information relating to himself as may be 
prescribed. 

1. The proviso ins. by Act 21 of 2015, s. 16  (w.e.f. 29-5-2015). 
2. Subs. by Act 1 of 2018, s. 63, for “shall be voidable at the option of the Board” (w.e.f. 9-2-2018). 
3. Subs. by Act 29 of 2020, s. 39, for certain words (w.e.f. 21-12-2020). 
4. Subs. by s. 39, ibid., for certain words (w.e.f. 21-12-2020). 

129 

 
                                                           
(3) The register referred to in sub-section (1) shall be kept at the registered office of the company and 
it shall be open for inspection at such office during business hours and extracts may be taken therefrom, 
and copies thereof as may be required by any member of the company shall be furnished by the company 
to such extent, in such manner, and on payment of such fees as may be prescribed. 

(4) The register to be kept under this section shall also be produced at the commencement of every 
annual general meeting of the company and shall remain open and accessible during the continuance of the 
meeting to any person having the right to attend the meeting. 

(5) Nothing contained in sub-section (1) shall apply to any contract or arrangement— 

(a) for the sale, purchase or supply of any goods, materials or services if the value of such goods 
and materials or the cost of such services does not exceed five lakh rupees in the aggregate in any year; 
or 

(b) by a banking company for the collection of bills in the ordinary course of its business. 

(6) Every director who fails to comply with the provisions of this section and the rules made thereunder 

shall be liable to a penalty of twenty-five thousand rupees. 

190. Contract of employment with managing or whole-time director.—(1) Every company shall 

keep at its registered office,— 

(a) where a contract of service with a managing or whole-time director is in writing, a copy of the 

contract; or 

(b) where such a contract is not in writing, a written memorandum setting out its terms. 

(2) The copies of the contract or the memorandum kept under sub-section (1) shall be open to inspection 

by any member of the company without payment of fee. 

(3) If any default is made in complying with the provisions of sub-section (1) or sub-section (2), the 
company shall be liable to a penalty of twenty-five thousand rupees and every officer of the company who 
is in default shall be liable to a penalty of five thousand rupees for each default. 

(4) The provisions of this section shall not apply to a private company. 

191.  Payment  to  director  for  loss  of  office,  etc.,  in  connection  with  transfer  of  undertaking, 

property or shares.—(1) No director of a company shall, in connection with— 

(a) the transfer of the whole or any part of any undertaking or property of the company; or 

(b) the transfer to any person of all or any of the shares in a company being a transfer resulting 

from— 

(i) an offer made to the general body of shareholders; 

(ii) an offer made by or on behalf of some other body corporate with a view to a company 
becoming a subsidiary company of such body corporate or a subsidiary company of its holding 
company; 

(iii) an offer made by or on behalf of an individual with a view to his obtaining the right to 
exercise, or control the exercise of, not less than one-third of the total voting power at any general 
meeting of the company; or 

(iv) any other offer which is conditional on acceptance to a given extent, receive any payment 
by  way  of  compensation  for  loss  of  office  or  as  consideration  for  retirement  from  office,  or  in 
connection  with  such  loss  or  retirement  from  such  company  or  from  the  transferee  of  such 
undertaking or property, or from the transferees of shares or from any other person, not being such 
company, unless particulars as may be prescribed with respect to the payment proposed to be made 
by such transferee or person, including the amount thereof, have been disclosed to the members of 
the company and the proposal has been approved by the company in general meeting. 

(2) Nothing in sub-section (1) shall affect any payment made by a company to a managing director or 
whole-time  director  or  manager  of  the  company  by  way  of  compensation  for  loss  of  office  or  as 

130 

 
consideration for retirement from office or in connection with such loss or retirement subject to limits or 
priorities, as may be prescribed. 

(3) If the payment under sub-section (1) or sub-section (2) is not approved for want of quorum either 

in a meeting or an adjourned meeting, the proposal shall not be deemed to have been approved. 

(4) Where a director of a company receives payment of any amount in contravention of sub-section (1) 
or the proposed payment is made before it is approved in the meeting, the amount so received by the director 
shall be deemed to have been received by him in trust for the company. 

1[(5) If a director of the company makes any default in complying with the provisions of this section, 

such director shall be liable to a penalty of one lakh rupees.] 

(6) Nothing in this section shall be taken to prejudice the operation of any law requiring disclosure to 
be made with respect to any payment received under this section or such other like payments made to a 
director. 

192. Restriction on non-cash transactions involving directors.—(1) No company shall enter into an 

arrangement by which— 

(a) a director of the company or its holding, subsidiary or associate company or a person connected 

with him acquires or is to acquire assets for consideration other than cash, from the company; or 

(b) the company acquires or is to acquire assets for consideration other than cash, from such director 

or person so connected, 

unless prior approval for such arrangement is accorded by a resolution of the company in general meeting 
and if the director or connected person is a director of its holding company, approval under this               sub-
section  shall  also  be  required  to  be  obtained  by  passing  a  resolution  in  general  meeting  of  the  holding 
company. 

(2) The notice for approval of the resolution by the company or holding company in general meeting 
under sub-section (1) shall include the particulars of the arrangement along with the value of the assets 
involved in such arrangement duly calculated by a registered valuer. 

(3)  Any  arrangement  entered  into  by  a  company  or  its  holding  company  in  contravention  of  the 

provisions of this section shall be voidable at the instance of the company unless— 

(a)  the  restitution  of  any  money  or  other  consideration  which  is  the  subject  matter  of  the 
arrangement is no longer possible and the company has been indemnified by any other person for any 
loss or damage caused to it; or 

(b)  any  rights  are  acquired  bona  fide  for  value  and  without  notice  of  the  contravention  of  the 

provisions of this section by any other person. 
193. Contract by One Person Company.—(1) Where One Person Company limited by shares or by 
guarantee  enters  into  a  contract  with  the  sole  member  of  the  company  who  is  also  the  director  of  the 
company, the company shall, unless the contract is in writing, ensure that the terms of the contract or offer 
are contained in a memorandum or are recorded in the minutes of the first meeting of the Board of Directors 
of the company held next after entering into contract: 

Provided that nothing in this sub-section shall apply to contracts entered into by the company in the 

ordinary course of its business. 

(2)  The  company  shall  inform  the  Registrar  about  every  contract  entered  into  by  the  company  and 
recorded in the minutes of the meeting of its Board of Directors under sub-section (1) within a period of 
fifteen days of the date of approval by the Board of Directors. 

194.  [Prohibition  on  forward  dealings  in  securities  of  company  by  director  or  key  managerial 

personnel.] Omitted by the Companies (Amendment) Act,  2017 (1 of 2018), s. 64 (w.e.f. 9-2-2018). 
195. [Prohibition on insider trading of securities.] Omitted by s. 65, ibid. (w.e.f. 9-2-2018). 

1. Subs. by Act 22 of 2019, s. 28, for sub-section (5) (w.e.f. 2-11-2018). 

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CHAPTER XIII 
APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL 

196. Appointment of managing director, whole-time director or manager.—(1) No company shall 

appoint or employ at the same time a managing director and a manager. 

(2) No company shall appoint or re-appoint any person as its managing director, whole-time director 

or manager for a term exceeding five years at a time: 

Provided that no re-appointment shall be made earlier than one year before the expiry of his term. 
(3) No company shall appoint or continue the employment of any person as managing director, whole-

time director or manager who — 

(a) is below the age of twenty-one years or has attained the age of seventy years: 
Provided that appointment of a person who has attained the age of seventy years may be made by 
passing a special resolution in which case the explanatory statement annexed to the notice for such 
motion shall indicate the justification for appointing such person; 

1[Provided further that where no such special resolution is passed but votes cast in favour of the 
motion exceed the votes, if any, cast against the motion and the Central Government is satisfied, on an 
application  made  by  the  Board,  that  such  appointment  is  most  beneficial  to  the  company,  the 
appointment of the person who has attained the age of seventy years may be made.]”; 
(b) is an undischarged insolvent or has at any time been adjudged as an insolvent; 
(c)  has  at  any  time  suspended  payment  to  his  creditors  or  makes,  or  has  at  any  time  made,  a 

composition with them; or 

(d) has at any time been convicted by a court of an offence and sentenced for a period of more than 

six months. 
(4) Subject to the provisions of section 197 and Schedule V, a managing director, whole-time director 
or manager shall be appointed and the terms and conditions of such appointment and remuneration payable 
be approved by the Board of Directors at a meeting which shall be subject to approval by a resolution at the 
next general meeting of the company and by the Central Government in case such appointment is at variance 
to the conditions 2[specified in Part I of that Schedule]: 

Provided  that  a  notice  convening  Board  or  general  meeting  for  considering  such  appointment  shall 
include  the  terms  and  conditions  of  such  appointment,  remuneration  payable  and  such  other  matters 
including interest, of a director or directors in such appointments, if any: 

Provided further that a return in the prescribed form shall be filed within sixty days of such appointment 

with the Registrar. 

(5) Subject to the provisions of this Act, where an appointment of a managing director, whole-time 
director or manager is not approved by the company at a general meeting, any act done by him before such 
approval shall not be deemed to be invalid. 

197.  Overall  maximum  managerial  remuneration  and  managerial  remuneration  in  case  of 
absence or inadequacy of profits.—(1) The total managerial remuneration payable by a public company, 
to its directors, including managing director and whole-time director, and its manager in respect of any 
financial year shall not exceed eleven per cent. of the net profits of that company for  that financial year 
computed in the manner laid down in section 198 except that the remuneration of the directors shall not be 
deducted from the gross profits: 

Provided  that  the  company  in  general  meeting  may,  3***  authorise  the  payment  of  remuneration 

exceeding eleven per cent. of the net profits of the company, subject to the provisions of Schedule V: 

Provided  further  that,  except  with  the  approval  of  the  company  in  general  meeting,  4[by  a  special 

resolution,]— 

(i) the remuneration payable to any one managing director; or whole-time director or manager shall 
not exceed five per cent. of the net profits of the company and if there is more than one such director 
remuneration shall not exceed ten per cent. of the net profits to all such directors and manager taken 
together; 

1. The proviso ins. by Act 1 of 2018, s. 66 (w.e.f. 12-9-2018).  
2. Subs. by s. 66, ibid., for “specified in that Schedule” (w.e.f. 12-9-2018).  
3. The words “with the approval of the Central Government,” omitted by Act 1 of 2018,  s. 67 (w.e.f. 12-9-2018). 
4. Ins. by s. 67, ibid.  (w.e.f. 12-9-2018).   

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(ii)  the  remuneration  payable  to  directors  who  are  neither  managing  directors  nor  whole-time 

directors shall not exceed,— 

(A) one per cent. of the net profits of the company, if there is a managing or whole-time director 

or manager; 

(B) three per cent. of the net profits in any other case. 

1[Provided  also  that,  where  the  company  has  defaulted  in  payment  of  dues  to  any  bank  or  public 
financial institution or non-convertible debenture holders or any other secured creditor, the prior approval 
of  the  bank  or  public  financial  institution  concerned  or  the  non-convertible  debenture  holders  or  other 
secured creditor, as the case may be, shall be obtained by the company before obtaining the approval in the 
general meeting.] 

(2) The percentages aforesaid shall be exclusive of any fees payable to directors under sub-section (5). 

(3) Notwithstanding anything contained in sub-sections (1) and (2), but subject to the provisions of 
Schedule V, if, in any financial year, a company has no profits or its profits are inadequate, the company 
shall not pay to its directors, including any managing or whole-time director or manager,  2[or any other 
non-executive director, including an independent director] by way of remuneration any sum exclusive of 
any fees payable to directors under sub-section (5) hereunder except in accordance with the provisions of 
Schedule V 3***. 

(4) The remuneration payable to the directors of a company, including any managing or whole-time 
director or manager, shall be determined, in accordance with and subject to the provisions of this section, 
either by the articles of the company, or by a resolution or, if the articles so require, by a special resolution, 
passed by the company in general meeting and the remuneration payable to a director determined aforesaid 
shall be inclusive of the remuneration payable to him for the services rendered by him in any other capacity: 

Provided that any remuneration for services rendered by any such director in other capacity shall not 

be so included if— 

(a) the services rendered are of a professional nature; and 

(b)  in the  opinion  of  the  Nomination  and  Remuneration  Committee,  if the  company  is  covered 
under sub-section (1) of section 178, or the Board of Directors in other cases, the director possesses the 
requisite qualification for the practice of the profession. 

(5)  A  director  may  receive  remuneration  by  way  of  fee  for  attending  meetings  of  the  Board  or 

Committee thereof or for any other purpose whatsoever as may be decided by the Board: 

Provided that the amount of such fees shall not exceed the amount as may be prescribed: 

Provided further that different fees for different classes of companies and fees in respect of independent 

director may be such as may be prescribed. 

(6)  A  director  or  manager  may  be  paid  remuneration  either  by  way  of  a  monthly  payment  or  at  a 

specified percentage of the net profits of the company or partly by one way and partly by the other. 

4* 

* 

* 

* 

* 

* 

 (8) The net profits for the purposes of this section shall be computed in the manner referred to in section 

198. 

5[(9) If any director draws or receives, directly or indirectly, by way of remuneration any such sums in 
excess of the limit prescribed by this section or without approval required under this section, he shall refund 
such sums to the company, within two years or such lesser period as may be allowed by the company, and 
until such sum is refunded, hold it in trust for the company.]  

1. The proviso ins. by Act 1 of 2018,  s. 67 (w.e.f. 12-9-2018).  
2. Ins. by Act 29 of 2020, s. 40 (w.e.f. 18-3-2021). 
3. The words “and if it is not able to comply with such provisions, with the previous approval of the Central Government” 

omitted by s. 67, ibid.  (w.e.f.12-9-2018).  

4. Sub-section (7) omitted by Act 22 of 2019, s. 29 (w.e.f. 2-11-2018). 
5. Subs. by Act 1 of 2018, s. 67 (w.e.f. 12-9-2018).  

133 

 
 
 
 
 
 
 
 
                                                           
(10) The company shall not waive the recovery of any sum refundable to it under sub-section (9) unless 
1[approved  by  the  company  by  special  resolution  within  two  years  from  the  date  the  sum  becomes 
refundable]. 

2[Provided that where the company has defaulted in payment of dues to any bank or public financial 
institution or non-convertible debenture holders or any other secured creditor, the prior approval of the bank 
or public financial institution concerned or the non-convertible debenture holders or other secured creditor, 
as the case may be, shall be obtained by the company before obtaining approval of such waiver.] 

(11)  In  cases  where  Schedule  V  is  applicable  on  grounds  of  no  profits  or  inadequate  profits,  any 
provision  relating  to  the  remuneration  of  any  director  which  purports  to  increase  or  has  the  effect  of 
increasing  the  amount  thereof,  whether  the  provision  be  contained  in  the  company’s  memorandum  or 
articles, or in an agreement entered into by it, or in any resolution passed by the company in general meeting 
or its Board, shall not have any effect unless such increase is in accordance with the conditions specified in 
that Schedule 3***. 

(12) Every listed company shall disclose in the Board’s report, the ratio of the remuneration of each 

director to the median employee’s remuneration and such other details as may be prescribed. 

(13)  Where  any  insurance  is  taken  by  a  company  on  behalf  of  its  managing  director,  whole-time 
director, manager, Chief Executive Officer, Chief Financial Officer or Company Secretary for indemnifying 
any of them against any liability in respect of any negligence, default, misfeasance, breach of duty or breach 
of trust for which they may be guilty in relation to the company, the premium paid on such insurance shall 
not be treated as part of the remuneration payable to any such personnel: 

Provided that if such person is proved to be guilty, the premium paid on such insurance shall be treated 

as part of the remuneration. 

(14) Subject to the provisions of this section, any director who is in receipt of any commission from the 
company  and  who is  a  managing  or  whole-time  director  of the  company  shall not be disqualified from 
receiving  any  remuneration  or  commission  from  any  holding  company  or  subsidiary  company  of  such 
company subject to its disclosure by the company in the Board’s report. 

4[(15)  If any person makes any default in complying with the provisions of this section, he shall be 
liable to a penalty of one lakh rupees and where any default has been made by a company, the company 
shall be liable to a penalty of five lakh rupees.] 

5[(16) The auditor of the company shall, in his report under section 143, make a statement as to whether 
the remuneration paid by the company to its directors is in accordance with the provisions of this section, 
whether remuneration paid to any director is in excess of the limit laid down under this section and give 
such other details as may be prescribed.  

 (17) On and from the commencement of the Companies (Amendment) Act, 2017, any application made 
to the Central Government under the provisions of this section [as it stood before such commencement], 
which  is  pending  with  that  Government  shall  abate,  and  the  company  shall,  within  one  year  of  such 
commencement, obtain the approval in accordance with the provisions of this section, as so amended.] 

198. Calculation of profits.—(1) In computing the net profits of a company in any financial year for 

the purpose of section 197,— 

(a) credit shall be given for the sums specified in sub-section (2), and credit shall not be given for 

those specified in sub-section (3); and 

(b) the sums specified in sub-section (4) shall be deducted, and those specified in sub-section (5) 

shall not be deducted. 

1. Subs. by Act 1 of 2018,  s. 67, for “permitted by the Central Government” (w.e.f. 12-9-2018). 
2. The proviso ins. by s. 67, ibid., (w.e.f. 12-9-2018).  
3. The words “and if such conditions are not being complied, the approval of the Central Government had been obtained” by             

s. 67, ibid.,  (w.e.f. 12-9-2018).  

4. Subs. by Act 22 of 2019, s. 29, for sub-section (15) (w.e.f. 2-11-2018). 
5. Ins. by Act 1 of 2018, s. 67 (w.e.f. 12-9-2018).   

134 

 
                                                           
(2) In making the computation aforesaid, credit shall be given for the bounties and subsidies received 
from any Government, or any public authority constituted or authorised in this behalf, by any Government, 
unless and except in so far as the Central Government otherwise directs. 

(3) In making the computation aforesaid, credit shall not be given for the following sums, namely:— 

(a) profits, by way of premium on shares or debentures of the company, which are issued or sold 
by  the  company  1[unless the  company  is an investment  company  as  referred  to in  clause (a)  of  the 
Explanation to section 186]; 

(b) profits on sales by the company of forfeited shares; 
(c)  profits  of  a  capital  nature  including  profits  from  the  sale  of  the  undertaking  or  any  of  the 

undertakings of the company or of any part thereof; 

(d) profits from the sale of any immovable property or fixed assets of a capital nature comprised in 
the undertaking or any of the undertakings of the company, unless the business of the company consists, 
whether wholly or partly, of buying and selling any such property or assets: 

Provided that where the amount for which any fixed asset is sold exceeds the written-down value 
thereof, credit shall be given for so much of the excess as is not higher than the difference between the 
original cost of that fixed asset and its written-down value; 

(e) any change in carrying amount of an asset or of a liability recognised inequity reserves including 

surplus in profit and loss account on measurement of the asset or the liability at fair value. 
2[(f) any amount representing unrealised gains, notional gains or revaluation of assets.] 
(4) In making the computation aforesaid, the following sums shall be deducted, namely:— 

(a) all the usual working charges; 
(b) directors’ remuneration; 
(c) bonus or commission paid or payable to any member of the company’s staff, or to any engineer, 
technician or person employed or engaged by the company, whether on a whole-time or on a part-time 
basis; 

(d) any tax notified by the Central Government as being in the nature of a tax on excess or abnormal 

profits; 

(e) any tax on business profits imposed for special reasons or in special circumstances and notified 

by the Central Government in this behalf; 

(f) interest on debentures issued by the company; 
(g) interest on mortgages executed by the company and on loans and advances secured by a charge 

on its fixed or floating assets; 

(h) interest on unsecured loans and advances; 
(i) expenses on repairs, whether to immovable or to movable property, provided the repairs are not 

of a capital nature; 

(j) outgoings inclusive of contributions made under section 181; 
(k) depreciation to the extent specified in section 123; 
(l)  the  excess  of  expenditure  over  income,  which  had  arisen  in  computing  the  net  profits  in 
accordance with this section in any year  3***, in so far as such excess has not been deducted in any 
subsequent year preceding the year in respect of which the net profits have to be ascertained; 

(m) any compensation or damages to be paid in virtue of any legal liability including a liability 

arising from a breach of contract; 

(n) any sum paid by way of insurance against the risk of meeting any liability such as is referred to 

in clause (m); 

(o) debts considered bad and written off or adjusted during the year of account. 

(5) In making the computation aforesaid, the following sums shall not be deducted, namely:— 

(a) income-tax and super-tax payable by the company under the Income-tax Act, 1961               (43 
of 1961), or any other tax on the income of the company not falling under clauses (d) and (e) of sub-
section (4); 

1. Ins. by Act 1 of 2018,  s. 68 (w.e.f. 12-9-2018).   
2. Clause (f) ins. by s. 68,  ibid. (w.e.f. 12-9-2018).  
3. The words “which begins at or after the commencement of this Act” omitted by s. 68, ibid.  (w.e.f. 12-9-2018). 

135 

 
                                                           
(b)  any  compensation,  damages  or  payments  made  voluntarily,  that  is to  say, otherwise than  in 

virtue of a liability such as is referred to in clause (m) of sub-section (4); 

(c) loss of a capital nature including loss on sale of the undertaking or any of the undertakings of 
the company or of any part thereof not including any excess of the written-down value of any asset 
which is sold, discarded, demolished or destroyed over its sale proceeds or its scrap value; 

(d) any change in carrying amount of an asset or of a liability recognised inequity reserves including 

surplus in profit and loss account on measurement of the asset or the liability at fair value. 
199. Recovery of remuneration in certain cases.—Without prejudice to any liability incurred under 
the provisions of this Act or any other law for the time being in force, where a company is required to           
re-state its financial statements due to fraud or non-compliance with any requirement under this Act and 
the rules made thereunder, the company shall recover from any past or present managing director or 
whole-time director or manager or Chief Executive Officer (by whatever name called) who, during the 
period for which the financial statements are required to be re-stated, received the remuneration 
(including stock option) in excess of what would have been payable to him as per restatement of financial 
statements. 

200. Central Government or company to fix limit with regard to remuneration.—Notwithstanding 
anything contained in this Chapter, 1*** a company may, while according its approval under section 196, 
to any appointment or to any remuneration under section 197 in respect of cases where the company has 
inadequate or no profits, fix the remuneration within the limits specified in this Act, at such amount or 
percentage  of  profits  of  the  company,  as  it  may  deem  fit  and  while  fixing  the  remuneration,  1***  the 
company shall have regard to— 

(a) the financial position of the company; 
(b) the remuneration or commission drawn by the individual concerned in any other capacity; 
(c) the remuneration or commission drawn by him from any other company; 
(d) professional qualifications and experience of the individual concerned; 
(e) such other matters as may be prescribed. 

201. Forms of, and procedure in relation to, certain applications.—(1) Every application made to 

the Central Government under 2[section 196] shall be in such form as may be prescribed. 

(2) (a) Before any application is made by a company to the Central Government under 3[section 196], 
there shall be issued by or on behalf of the company a general notice to the members thereof, indicating the 
nature of the application proposed to be made. 

(b) Such notice shall be published at least once in a newspaper in the principal language of the district 
in which the registered office of the company is situate and circulating in that district, and at least once in 
English in an English newspaper circulating in that district. 

(c)  The  copies  of  the  notices,  together  with  a  certificate  by  the  company  as  to  the  due  publication 

thereof, shall be attached to the application. 

202.  Compensation  for  loss  of  office  of  managing  or  whole-time  director  or  manager.—(1)  A 
company  may  make  payment  to  a  managing  or  whole-time  director  or  manager,  but  not  to  any  other 
director, by way of compensation for loss of office, or as consideration for retirement from office or in 
connection with such loss or retirement. 

(2) No payment shall be made under sub-section (1) in the following cases, namely:— 

(a) where the director resigns from his office as a result of the reconstruction of the company, or of 
its amalgamation with any other body corporate or bodies corporate, and is appointed as the managing 
or whole-time director, manager or other officer of the reconstructed company or of the body corporate 
resulting from the amalgamation; 

(b) where the director resigns from his office otherwise than on the reconstruction of the company 

or its amalgamation as aforesaid; 

(c) where the office of the director is vacated under sub-section (1) of section 167; 
(d)  where the  company  is being  wound  up,  whether  by  an  order  of the Tribunal  or  voluntarily, 

provided the winding up was due to the negligence or default of the director; 

1. The words “the Central Government or” omitted by Act 1 of 2018, s. 69 (w.e.f. 12-9-2018).   
2. The words “this Chapter” omitted by s. 70, ibid. (w.e.f. 12-9-2018). 
3. Subs. by s. 70,  ibid.  for  “any of the sections aforesaid” (w.e.f. 12-9-2018). 

136 

 
                                                           
(e) where the director has been guilty of fraud or breach of trust in relation to, or of gross negligence 
in or gross mismanagement of, the conduct of the affairs of the company or any subsidiary company or 
holding company thereof; and 

(f) where the director has instigated, or has taken part directly or indirectly in bringing about, the 

termination of his office. 
(3) Any payment made to a managing or whole-time director or manager in pursuance of sub-section 
(1) shall not exceed the remuneration which he would have earned if he had been in office for the remainder 
of his term or for three years, whichever is shorter, calculated on the basis of the average remuneration 
actually earned by him during a period of three years immediately preceding the date on which he ceased 
to hold office, or where he held the office for a lesser period than three years, during such period: 

Provided that no such payment shall be made to the director in the event of the commencement of the 
winding up of the company, whether before or at any time within twelve months after, the date on which 
he  ceased  to  hold  office,  if  the  assets  of  the  company  on  the  winding  up,  after  deducting  the  expenses 
thereof, are not sufficient to repay to the shareholders the share capital, including the premiums, if any, 
contributed by them. 

(4)  Nothing  in  this  section  shall  be  deemed  to  prohibit  the  payment  to  a  managing  or  whole-time 
director,  or  manager,  of  any  remuneration  for  services  rendered  by  him  to  the  company  in  any  other 
capacity. 

203.  Appointment  of  key  managerial  personnel.—(1)  Every  company  belonging  to  such  class  or 
classes  of  companies  as  may  be  prescribed  shall  have  the  following  whole-time  key  managerial 
personnel,— 

(i) managing director, or Chief Executive Officer or manager and in their absence, a whole-time 

director; 

(ii) company secretary; and 
(iii) Chief Financial Officer: 
Provided that an individual shall not be appointed or reappointed as the chairperson of the company, 
in pursuance of the articles of the company, as well as the managing director or Chief Executive Officer 
of the company at the same time after the date of commencement of this Act unless,— 

(a) the articles of such a company provide otherwise; or 
(b) the company does not carry multiple businesses: 
Provided  further  that  nothing  contained  in  the  first  proviso  shall  apply  to  such  class  of 
companies engaged in multiple businesses and which has appointed one or more Chief Executive 
Officers for each such business as may be notified by the Central Government. 

(2)  Every  whole-time  key  managerial  personnel  of  a  company  shall  be  appointed  by  means  of  a 
resolution of the Board containing the terms and conditions of the appointment including the remuneration. 
(3) A whole-time key managerial personnel shall not hold office in more than one company except in 

its subsidiary company at the same time: 

Provided that nothing contained in this sub-section shall disentitle a key managerial personnel from 

being a director of any company with the permission of the Board: 

Provided further that whole-time key managerial personnel holding office in more than one company 
at the same time on the date of commencement of this Act, shall, within a period of six months from such 
commencement, choose one company, in which he wishes to continue to hold the office of key managerial 
personnel: 

Provided also that a company may appoint or employ a person as its managing director, if he is the 
managing director or manager of one, and of not more than one, other company and such appointment or 
employment is made or approved by a resolution passed at a meeting of the Board with the consent of all 
the directors present at the meeting and of which meeting, and of the resolution to be moved thereat, specific 
notice has been given to all the directors then in India. 

(4) If the office of any whole-time key managerial personnel is vacated, the resulting vacancy shall be 
filled-up by the Board at a meeting of the Board within a period of six months from the date of such vacancy. 

137 

 
1[(5) If any company makes any default in complying with the provisions of this section, such company 
shall  be  liable  to  a  penalty  of  five  lakh  rupees  and  every  director  and  key  managerial  personnel  of  the 
company who is in default shall be liable to a penalty of fifty thousand rupees and where the default is a 
continuing one, with a further penalty of one thousand rupees for each day after the first during which such 
default continues but not exceeding five lakh rupees.] 

204. Secretarial audit for bigger companies.—(1) Every listed company and a company belonging 
to other class of companies as may be prescribed shall annex with its Board’s report made in terms of sub-
section (3) of section 134, a secretarial audit report, given by a company secretary in practice, in such form 
as may be prescribed. 

(2) It shall be the duty of the company to give all assistance and facilities to the company secretary in 

practice, for auditing the secretarial and related records of the company. 

(3) The Board of Directors, in their report made in terms of sub-section (3) of section 134, shall explain 
in full any qualification or observation or other remarks made by the company secretary in practice in his 
report under sub-section (1). 

(4) If a company or any officer of the company or the company secretary in practice, contravenes the 
provisions of this section, the company, every officer of the company or the company secretary in practice, 
who is in default, shall be 2[liable to a penalty of two lakh rupees]. 

205. Functions of company secretary.—(1) The functions of the company secretary shall include,— 

(a)  to  report  to  the  Board  about  compliance  with  the  provisions  of  this  Act,  the  rules  made 

thereunder and other laws applicable to the company; 

(b) to ensure that the company complies with the applicable secretarial standards; 

(c) to discharge such other duties as may be prescribed. 

Explanation.—For the purpose of this section, the expression “secretarial standards” means 

secretarial standards issued by the Institute of Company Secretaries of India constituted under section 3 of 
the Company Secretaries Act, 1980 (56 of 1980) and approved by the Central Government. 

(2) The provisions contained in section 204 and section 205 shall not affect the duties and functions of 
the Board of Directors, chairperson of the company, managing director or whole-time director under this 
Act, or any other law for the time being in force. 

CHAPTER XIV 

INSPECTION, INQUIRY AND INVESTIGATION 

206. Power to call for information, inspect books and conduct inquiries.—(1) Where on a scrutiny 
of any document filed by a company or on any information received by him, the Registrar is of the opinion 
that any further information or explanation or any further documents relating to the company is necessary, 
he may by a written notice require the company— 

(a) to furnish in writing such information or explanation; or 

(b) to produce such documents, 

within such reasonable time, as may be specified in the notice. 

(2) On the receipt of a notice under sub-section (1), it shall be the duty of the company and of its officers 
concerned  to  furnish  such  information  or  explanation  to  the  best  of  their  knowledge  and  power  and  to 
produce the documents to the Registrar within the time specified or extended by the Registrar: 

Provided that where such information or explanation relates to any past period, the officers who had 
been in the employment of the company for such period, if so called upon by the Registrar through a notice 
served on them in writing, shall also furnish such information or explanation to the best of their knowledge. 

1. Subs. by Act 22 of 2019, s. 30, for sub-section (5) (w.e.f. 2-11-2018). 
2. Subs. by Act 29 of 2020, s. 41, for certain words (w.e.f. 21-12-2020). 

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(3) If no information or explanation is furnished to the Registrar within the time specified under sub-
section  (1)  or  if  the  Registrar  on  an  examination  of  the  documents  furnished  is  of  the  opinion  that  the 
information  or  explanation  furnished  is  in  adequate  or  if  the  Registrar  is  satisfied  on  a  scrutiny  of  the 
documents furnished that an unsatisfactory state of affairs exists in the company and does not disclose a 
full and fair statement of the information required, he may, by another written notice, call on the company 
to  produce  for  his inspection  such  further  books  of  account,  books,  papers  and explanations  as  he  may 
require at such place and at such time as he may specify in the notice: 

Provided that before any notice is served under this sub-section, the Registrar shall record his reasons 

in writing for issuing such notice. 

(4) If the Registrar is satisfied on the basis of information available with or furnished to him or on a 
representation made to him by any person that the business of a company is being carried on for a fraudulent 
or unlawful purpose or not in compliance with the provisions of this Act or if the grievances of investors 
are not being addressed, the Registrar may, after informing the company of the allegations made against it 
by a written order, call on the company to furnish in writing any information or explanation on matters 
specified in the order within such time as he may specify therein and carry out such inquiry as he deems fit 
after providing the company a reasonable opportunity of being heard: 

Provided that the Central Government may, if it is satisfied that the circumstances so warrant, direct 
the Registrar or an inspector appointed by it for the purpose to carry out the inquiry under this sub-section: 

Provided further that where business of a company has been or is being carried on for a fraudulent or 
unlawful purpose, every officer of the company who is in default shall be punishable for fraud in the manner 
as provided in section 447. 

(5) Without prejudice to the foregoing provisions of this section, the Central Government may, if it is 
satisfied  that  the  circumstances  so  warrant,  direct  inspection  of  books  and  papers  of  a  company  by  an 
inspector appointed by it for the purpose. 

(6)  The  Central  Government  may,  having  regard  to  the  circumstances  by  general  or  special  order, 
authorise any statutory authority to carry out the inspection of books of account of a company or class of 
companies. 

(7) If a company fails to furnish any information or explanation or produce any document required 
under this section, the company and every officer of the company, who is in default shall be punishable 
with a fine which may extend to one lakh rupees and in the case of a continuing failure, with an additional 
fine which may extend to five hundred rupees for everyday after the first during which the failure continues. 

207.Conduct of inspection and inquiry.—(1) Where a Registrar or inspector calls for the books of 
account and other books and papers under section 206, it shall be the duty of every director, officer or other 
employee of the company to produce all such documents to the Registrar or inspector and furnish him with 
such statements, information or explanations in such form as the Registrar or inspector may require and 
shall render all assistance to the Registrar or inspector in connection with such inspection. 

(2)  The  Registrar  or  inspector,  making  an  inspection  or  inquiry  under  section  206  may,  during  the 

course of such inspection or inquiry, as the case may be,— 

(a) make or cause to be made copies of books of account and other books and papers; or 

(b) place or cause to be placed any marks of identification in such books in token of the inspection 

having been made. 

(3) Notwithstanding anything contained in any other law for the time being in force or in any contract 
to the contrary, the Registrar or inspector making an inspection or inquiry shall have all the powers as are 
vested in a civil court under the Code of Civil Procedure, 1908 (5 of 1908), while trying a suit in respect of 
the following matters, namely:— 

(a) the discovery and production of books of account and other documents, at such place and time 

as may be specified by such Registrar or inspector making the inspection or inquiry; 

(b) summoning and enforcing the attendance of persons and examining them on oath; and 

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(c) inspection of any books, registers and other documents of the company at any place. 

(4) (i) If any director or officer of the company disobeys the direction issued by the Registrar or the 
inspector under this section, the director or the officer shall be punishable with imprisonment which may 
extend to one year and with fine which shall not be less than twenty-five thousand rupees but which may 
extend to one lakh rupees. 

(ii) If a director or an officer of the company has been convicted of an offence under this section, the 
director or the officer shall, on and from the date on which he is so convicted, be deemed to have vacated 
his  office  as  such  and  on  such  vacation  of  office,  shall  be  disqualified  from  holding  an  office  in  any 
company. 

208. Report on inspection made.—The Registrar or inspector shall, after the inspection of the books 
of account or an inquiry under section 206 and other books and papers of the company under section 207, 
submit a report in writing to the Central Government along with such documents, if any, and such report 
may, if necessary, include a recommendation that further investigation into the affairs of the company is 
necessary giving his reasons in support. 

209. Search and seizure.—(1) Where, upon information in his possession or otherwise, the Registrar 
or inspector has reasonable ground to believe that the books and papers of a company, or relating to the key 
managerial personnel or any director or auditor or company secretary in practice if the company has not 
appointed a company secretary, are likely to be destroyed, mutilated, altered, falsified or secreted, he may, 
after obtaining an order from the Special Court for the seizure of such books and papers,— 

(a) enter, with such assistance as may be required, and search, the place or places where such books 

or papers are kept; and 

(b) seize such books and papers as he considers necessary after allowing the company to take copies 

of, or extracts from, such books or papers at its cost. 

(2) The Registrar or inspector shall return the books and papers seized under sub-section (1), as soon 
as may be, and in any case not later than one hundred and eightieth day after such seizure, to the company 
from whose custody or power such books or papers were seized: 

Provided that the books and papers may be called for by the Registrar or inspector for a further period 

of one hundred and eighty days by an order in writing if they are needed again: 

Provided  further  that  the  Registrar  or  inspector  may,  before  returning  such  books  and  papers  as 
aforesaid, take copies of, or extracts from them or place identification marks on them or any part thereof or 
deal with the same in such other manner as he considers necessary. 

(3) The provisions of the Code of Criminal Procedure, 1973 (2 of 1974) relating to searches or seizures 

shall apply, mutatis mutandis, to every search and seizure made under this section. 

210. Investigation into affairs of company.—(1) Where the Central Government is of the opinion, 

that it is necessary to investigate into the affairs of a company,— 

(a) on the receipt of a report of the Registrar or inspector under section 208; 

(b) on intimation of a special resolution passed by a company that the affairs of the company ought 

to be investigated; or 

(c) in public interest, 

it may order an investigation into the affairs of the company. 

(2) Where an order is passed by a court or the Tribunal in any proceedings before it that the affairs of 
a company ought to be investigated, the Central Government shall order an investigation into the affairs of 
that company. 

(3)  For  the  purposes  of  this  section,  the  Central  Government  may  appoint  one  or  more  persons  as 
inspectors to investigate into the affairs of the company and to report thereon in such manner as the Central 
Government may direct. 

140 

 
211. Establishment of Serious Fraud Investigation Office.—(1) The Central Government shall, by 
notification, establish an office to be called the Serious Fraud Investigation Office to investigate frauds 
relating to a company: 

Provided  that  until  the  Serious  Fraud  Investigation  Office  is  established  under  sub-section  (1),  the 
Serious Fraud Investigation Office set-up by the Central Government in terms of the Government of India 
Resolution No. 45011/16/2003-Adm-I, dated the 2nd July, 2003 shall be deemed to be the Serious Fraud 
Investigation Office for the purpose of this section. 

(2) The Serious Fraud Investigation Office shall be headed by a Director and consist of such number 
of experts from the following fields to be appointed by the Central Government from amongst persons of 
ability, integrity and experience in,— 

(i) banking; 

(ii) corporate affairs; 

(iii) taxation; 

(iv) forensic audit; 

(v) capital market; 

(vi) information technology; 

(vii) law; or 

(viii) such other fields as may be prescribed. 

(3) The Central Government shall, by notification, appoint a Director in the Serious Fraud Investigation 
Office, who shall be an officer not below the rank of a Joint Secretary to the Government of India having 
knowledge and experience in dealing with matters relating to corporate affairs. 

(4) The Central Government may appoint such experts and other officers and employees in the Serious 
Fraud Investigation Office as it considers necessary for the efficient discharge of its functions under this 
Act. 

(5) The terms and conditions of service of Director, experts, and other officers and employees of the 

Serious Fraud Investigation Office shall be such as may be prescribed. 

212. Investigation into affairs of Company by Serious Fraud Investigation Office.—(1) Without 
prejudice  to  the  provisions  of  section  210,  where  the  Central  Government  is  of  the  opinion,  that  it  is 
necessary to investigate into the affairs of a company by the Serious Fraud Investigation Office— 

(a) on receipt of a report of the Registrar or inspector under section 208; 

(b) on intimation of a special resolution passed by a company that its affairs are  required to be 

investigated; 

(c) in the public interest; or 

(d) on request from any Department of the Central Government or a State Government, 

the Central Government may, by order, assign the investigation into the affairs of the said company to the 
Serious Fraud Investigation Office and its Director, may designate such number of inspectors, as he may 
consider necessary for the purpose of such investigation. 

(2) Where any case has been assigned by the Central Government to the Serious Fraud Investigation 
Office for investigation under this Act, no other investigating agency of Central Government or any State 
Government shall proceed with investigation in such case in respect of any offence under this Act and in 
case  any  such  investigation  has  already  been  initiated,  it  shall  not  be  proceeded  further  with  and  the 
concerned agency shall transfer the relevant documents and records in respect of such offences under this 
Act to Serious Fraud Investigation Office. 

(3) Where the investigation into the affairs of a company has been assigned by the Central Government 
to  Serious  Fraud  Investigation  Office,  it  shall  conduct  the  investigation  in  the  manner  and  follow  the 

141 

 
procedure provided in this Chapter; and submit its report to the Central Government within such period as 
may be specified in the order. 

(4)  The  Director,  Serious  Fraud  Investigation  Office  shall  cause  the  affairs  of  the  company  to  be 

investigated by an Investigating Officer who shall have the power of the inspector under section 217. 

(5) The company and its officers and employees, who are or have been in employment of the company 
shall be responsible to provide all information, explanation, documents and assistance to the Investigating 
Officer as he may require for conduct of the investigation. 

(6) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), 1[offence 
covered under section 447] of this Act shall be cognizable and no person accused of any offence under 
those sections shall be released on bail or on his own bond unless— 

(i) the Public Prosecutor has been given an opportunity to oppose the application for such release; 

and 

(ii)  where  the  Public  Prosecutor  opposes  the  application,  the  court  is  satisfied  that  there  are 
reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit 
any offence while on bail: 

Provided that a person, who, is under the age of sixteen years or is a woman or is sick or infirm, may 

be released on bail, if the Special Court so directs: 

Provided further that the Special Court shall not take cognizance of any offence referred to this sub-

section except upon a complaint in writing made by— 

(i) the Director, Serious Fraud Investigation Office; or 

(ii) any officer of the Central Government authorised, by a general or special order in writing in 

this behalf by that Government. 

(7) The limitation on granting of bail specified in sub-section (6) is in addition to the limitations under 
the Code of Criminal Procedure, 1973 (2 of 1974) or any other law for the time being in force on granting 
of bail. 

(8)  2[If  any  officer  not  below  the  rank  of  Assistant  Director]  of  Serious  Fraud  Investigation  Office 
authorised in this behalf by the Central Government by general or special order, has on the basis of material 
in his possession reason to believe (the reason for such belief to be recorded in writing) that any person has 
been  guilty  of  any  offence  punishable  under  sections  referred  to  in  sub-section  (6),  he  may  arrest  such 
person and shall, as soon as may be, inform him of the grounds for such arrest. 

(9) 3[The officer authorized under sub-section (8) shall, immediately after arrest of such person under 
such sub-section], forward a copy of the order, along with the material in his possession, referred to in that 
sub-section,  to  the  Serious  Fraud  Investigation  Office  in  a  sealed  envelope,  in  such  manner  as  may  be 
prescribed and the Serious Fraud Investigation Office shall keep such order and material for such period as 
may be prescribed. 

(10) Every person arrested under sub-section (8) shall within twenty-four hours, be taken to a 4[Special 

Court or Judicial Magistrate] or a Metropolitan Magistrate, as the case may be, having jurisdiction: 

Provided that the period of twenty-four hours shall exclude the time necessary for the journey from the 

place of arrest to the 5[Special Court or Magistrate's court]. 

(11)  The  Central  Government  if  so  directs,  the  Serious  Fraud  Investigation  Office  shall  submit  an 

interim report to the Central Government. 

1. Subs. by Act 21 of 2015, s. 17, for certain words, brackets and figures (w.e.f. 29-5-2015). 
2. Subs. by Act 22 of 2019, s. 31, for “If the Director, Additional Director or Assistant Director” (w.e.f. 15-8-2019). 
3. Subs. s. 31, ibid., for “The Director, Additional Director or Assistant Director of Serious Fraud Investigation Office shall, 

immediately after arrest of such person under sub-section (8)” (w.e.f. 15-8-2019). 

4. Subs. by s. 31, ibid., for “Judicial Magistrate” (w.e.f. 15-8-2019). 
5. Subs. by s. 31, ibid., for “Magistrate’s Court” (w.e.f. 15-8-2019). 

142 

 
                                                           
(12)  On  completion  of  the  investigation,  the  Serious  Fraud  Investigation  Office  shall  submit  the 

investigation report to the Central Government. 

(13) Notwithstanding anything contained in this Act or in any other law for the time being in force, a 
copy of the investigation report may be obtained by any person concerned by making an application in this 
regard to the court. 

(14) On receipt of the investigation report, the Central Government may, after examination of the report 
(and after taking such legal advice, as it may think fit), direct the Serious Fraud Investigation Office to 
initiate prosecution against the company and its officers or employees, who are or have been in employment 
of the company or any other person directly or indirectly connected with the affairs of the company. 

1[(14A) Where the report under sub-section (11) or sub-section (12) states that fraud has taken place in 
a company and due to such fraud any director, key managerial personnel, other officer of the company or 
any other person or entity, has taken undue advantage or benefit, whether in the form of any asset, property 
or cash or in any other manner, the Central Government may file an application before the Tribunal for 
appropriate orders with regard to disgorgement of such asset, property or cash and also for holding such 
director, key managerial personnel, other officer or any other person liable personally without any limitation 
of liability.] 

(15) Notwithstanding anything contained in this Act or in any other law for the time being in force, the 
investigation report filed with the Special Court for framing of charges shall be deemed to be a report filed 
by a police officer under section 173 of the Code of Criminal Procedure, 1973 (2 of 1974). 

(16) Notwithstanding anything contained in this Act, any investigation or other action taken or initiated 
by Serious Fraud Investigation Office under the provisions of the Companies Act, 1956 (1 of 1956) shall 
continue to be proceeded with under that Act as if this Act had not been passed. 

(17) (a) In case Serious Fraud Investigation Office has been investigating any offence under this Act, 
any  other  investigating  agency,  State  Government,  police  authority,  income-tax  authorities  having  any 
information  or  documents  in  respect  of  such  offence  shall  provide  all  such  information  or  documents 
available with it to the Serious Fraud Investigation Office; 

(b) The Serious Fraud Investigation Office shall share any information or documents available with it, 
with any investigating agency, State Government, police authority or income-tax authorities, which may be 
relevant  or  useful  for  such  investigating  agency,  State  Government,  police  authority  or  income-tax 
authorities in respect of any offence or matter being investigated or examined by it under any other law. 

213. Investigation into company’s affairs in other cases.—The Tribunal may,— 

(a) on an application made by— 

(i) not less than one hundred members or members holding not less than one-tenth of the total 

voting power, in the case of a company having a share capital; or 

(ii) not less than one-fifth of the persons on the company’s register of members, in the case of 

a company having no share capital, 

and supported by such evidence as may be necessary for the purpose of showing that the applicants have 
good reasons for seeking an order for conducting an investigation into the affairs of the company; or 

(b)  on  an  application  made  to  it  by  any  other  person  or  otherwise,  if  it  is  satisfied  that  there  are 

circumstances suggesting that— 

(i) the business of the company is being conducted with intent to defraud its creditors, members or 
any other person or otherwise for a fraudulent or unlawful purpose, or in a manner oppressive to any 
of its members or that the company was formed for any fraudulent or unlawful purpose; 

(ii) persons concerned in the formation of the company or the management of its affairs have in 
connection therewith been guilty of fraud, misfeasance or other misconduct towards the company or 
towards any of its members; or 

1. Ins. by Act 22 of 2019,  s. 31 (w.e.f. 15-8-2019). 

143 

 
                                                           
(iii) the members of the company have not been given all the information with respect to its affairs 
which  they  might  reasonably  expect,  including  information  relating  to  the  calculation  of  the 
commission payable to a managing or other director, or the manager, of the company, 

order, after giving a reasonable opportunity of being heard to the parties concerned, that the  affairs of the 
company ought to be investigated by an inspector or inspectors appointed by the Central Government and 
where such an order is passed, the Central Government shall appoint one or more competent persons as 
inspectors to investigate into the affairs of the company in respect of such matters and to report thereupon 
to it in such manner as the Central Government may direct: 
Provided that if after investigation it is proved that— 

(i) the business of the company is being conducted with intent to defraud its creditors, members or 
any other persons or otherwise for a fraudulent or unlawful purpose, or that the company was formed 
for any fraudulent or unlawful purpose; or 

(ii) any person concerned in the formation of the company or the management of its affairs have in 

connection therewith been guilty of fraud, 

then, every officer of the company who is in default and the person or persons concerned in the formation 
of the company or the management of its affairs shall be punishable for fraud in the manner as provided in 
section 447. 

214.  Security  for  payment  of  costs  and  expenses  of  investigation.—Where  an  investigation  is 
ordered  by  the  Central  Government  in  pursuance  of  clause  (b)  of  sub-section  (1)  of  section  210,  or  in 
pursuance  of  an  order  made  by  the  Tribunal  under  section  213,  the  Central  Government  may  before 
appointing  an  inspector  under  sub-section  (3)  of  section  210  or  clause  (b)  of  section  213,  require  the 
applicant to give such security not exceeding twenty-five thousand rupees as may be prescribed, as it may 
think fit, for payment of the costs and expenses of the investigation and such security shall be refunded to 
the applicant if the investigation results in prosecution. 

215.  Firm,  body  corporate  or  association  not  to  be  appointed  as  inspector.—No  firm,  body 

corporate or other association shall be appointed as an inspector. 

216. Investigation of ownership of company.—(1) Where it appears to the Central Government that 
there is a reason so to do, it may appoint one or more inspectors to investigate and report on matters relating 
to the company, and its membership for the purpose of determining the true persons— 

(a) who are or have been financially interested in the success or failure, whether real or apparent, 

of the company; or 

(b) who are or have been able to control or to materially influence the policy of  the 1[company; 

or]. 

2[(c) who have or had beneficial interest in shares of a company or who are or have been beneficial 

owners or significant beneficial owner of a company]. 

(2) Without prejudice to its powers under sub-section (1), the Central Government shall appoint one or 
more inspectors under that sub-section, if the Tribunal, in the course of any proceeding before it, directs by 
an order that the affairs of the company ought to be investigated as regards the membership of the company 
and other matters relating to the company, for the purposes specified in sub-section (1). 

(3) While appointing an inspector under sub-section (1), the Central Government may define the scope 
of the investigation, whether as respects the matters or the period to which it is to extend or otherwise, and 
in particular, may limit the investigation to matters connected with particular shares or debentures. 

(4) Subject to the terms of appointment of an inspector, his powers shall extend to the investigation of 
any circumstances suggesting the existence of any arrangement or understanding which, though not legally 
binding, is or was observed or is likely to be observed in practice and which is relevant for the purposes of 
his investigation. 

1. Subs. by Act 1 of 2018, s. 71, for “company” (w.e.f. 13-6-2018).  
2. Ins. by s. 71, ibid. (w.e.f. 13-6-2018). 

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217.  Procedure,  powers,  etc.,  of  inspectors.—(1)  It  shall  be  the  duty  of  all  officers  and  other 
employees and agents including the former officers, employees and agents of a company which is under 
investigation in accordance with the provisions contained in this Chapter, and where the affairs of any other 
body  corporate  or  a  person  are  investigated  under  section  219,  of  all  officers  and  other  employees  and 
agents including former officers, employees and agents of such body corporate or a person— 

(a) to preserve and to produce to an inspector or any person authorised by him in this behalf all 
books and papers of, or relating to, the company or,  as the case may be, relating to the other body 
corporate or the person, which are in their custody or power; and 

(b) otherwise to give to the inspector all assistance in connection with the investigation which they 

are reasonably able to give. 

(2) The inspector may require any body corporate, other than a body corporate referred to in sub-section 
(1), to furnish such information to, or produce such books and papers before him or any person authorised 
by him in this behalf as he may consider necessary, if the furnishing of such information or the production 
of such books and papers is relevant or necessary for the purposes of his investigation. 

(3) The inspector shall not keep in his custody any books and papers produced under sub-section (1) or 
sub-section  (2)  for  more  than  one  hundred  and  eighty  days  and  return  the  same  to  the  company,  body 
corporate, firm or individual by whom or on whose behalf the books and papers were produced: 

Provided that the books and papers may be called for by the inspector if they are needed again for a 

further period of one hundred and eighty days by an order in writing. 

(4) An inspector may examine on oath— 

(a) any of the persons referred to in sub-section (1); and 

(b) with the prior approval of the Central Government, any other person, 

in relation to the affairs of the company, or other body corporate or person, as the case may be, and for that 
purpose may require any of those persons to appear before him personally: 

Provided  that in  case  of  an  investigation  under  section  212,  the  prior approval  of  Director,  Serious 

Fraud Investigation Office shall be sufficient under clause (b). 

(5) Notwithstanding anything contained in any other law for the time being in force or in any contract 
to the contrary, the inspector, being an officer of the Central Government, making an investigation under 
this Chapter shall have all the powers as are vested in a civil court under the Code of Civil Procedure, 1908 
(5 of 1908), while trying a suit in respect of the following matters, namely:— 

(a) the discovery and production of books of account and other documents, at such place and time 

as may be specified by such person; 

(b) summoning and enforcing the attendance of persons and examining them on oath; and 

(c) inspection of any books, registers and other documents of the company at any place. 

(6) (i) If any director or officer of the company disobeys the direction issued by the Registrar or the 
inspector under this section, the director or the officer shall be punishable with imprisonment which may 
extend to one year and with fine which shall not be less than twenty-five thousand rupees but which may 
extend to one lakh rupees. 

(ii) If a director or an officer of the company has been convicted of an offence under this section, the 
director or the officer shall, on and from the date on which he is so convicted, be deemed to have vacated 
his  office  as  such  and  on  such  vacation  of  office,  shall  be  disqualified  from  holding  an  office  in  any 
company. 

(7) The notes of any examination under sub-section (4) shall be taken down in writing and shall be read 

over to, or by, and signed by, the person examined, and may thereafter be used in evidence against him. 

(8) If any person fails without reasonable cause or refuses— 

145 

 
(a) to produce to an inspector or any person authorised by him in this behalf any book or paper 

which is his duty under sub-section (1) or sub-section (2) to produce; 

(b) to furnish any information which is his duty under sub-section (2) to furnish; 

(c) to appear before the inspector personally when required to do so under sub-section (4) or to 

answer any question which is put to him by the inspector in pursuance of that sub-section; or 

(d) to sign the notes of any examination referred to in sub-section (7), 

he shall be punishable with imprisonment for a term which may extend to six months and with fine which 
shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees, and also with 
a further fine which may extend to two thousand rupees for every day after the first during which the failure 
or refusal continues. 

(9)  The  officers  of  the  Central  Government,  State  Government,  police  or  statutory  authority  shall 
provide  assistance  to  the  inspector  for  the  purpose  of  inspection,  inquiry  or  investigation,  which  the 
inspector may, with the prior approval of the Central Government, require. 

(10) The Central Government may enter into an agreement with the Government of a foreign State for 
reciprocal arrangements to assist in any inspection, inquiry or investigation under this Act or under the 
corresponding law in force in that State and may, by notification, render the application of this Chapter in 
relation  to  a  foreign  State  with  which  reciprocal  arrangements  have  been  made  subject  to  such 
modifications, exceptions, conditions and qualifications as may be deemed expedient for implementing the 
agreement with that State. 

(11) Notwithstanding anything contained in this Act or in the Code of Criminal Procedure, 1973(2 of 
1974) if, in the course of an investigation into the affairs of the company, an application is made to the 
competent court in India by the inspector stating that evidence is, or may be, available in a country or place 
outside India, such court may issue a letter of request to a court or an authority in such country or place, 
competent to deal with such request, to examine orally, or otherwise, any person, supposed to be acquainted 
with the facts and circumstances of the case, to record his statement made in the course of such examination 
and also to require such person or any other person to produce any document or thing, which may be in his 
possession pertaining to the case, and to forward all the evidence so taken or collected or the authenticated 
copies thereof or the things so collected to the court in India which had issued such letter of request: 

Provided that the letter of request shall be transmitted in such manner as the Central Government may 

specify in this behalf: 

Provided further that every statement recorded or document or thing received under this sub-section 

shall be deemed to be the evidence collected during the course of investigation. 

(12) Upon receipt of a letter of request from a court or an authority in a country or place outside India, 
competent to issue such letter in that country or place for the examination of any person or production of 
any document or thing in relation to affairs of a company under investigation in that country or place, the 
Central Government may, if it thinks fit, forward such letter of request to the court concerned, which shall 
thereupon  summon  the  person  before it  and  record  his  statement  or  cause any  document  or  thing  to  be 
produced,  or  send  the  letter  to  any  inspector  for  investigation,  who  shall  thereupon  investigate  into  the 
affairs of company in the same manner as the affairs of a company are investigated under this Act and the 
inspector shall submit the report to such court within thirty days or such extended time as the court may 
allow for further action: 

Provided that the evidence taken or collected under this sub-section or authenticated copies thereof or 
the things so collected shall be forwarded by the court, to the Central Government for transmission, in such 
manner as the Central Government may deem fit, to the court or the authority in country or place outside 
India which had issued the letter of request. 

218. Protection of employees during investigation.—(1) Notwithstanding anything contained in any 

other law for the time being in force, if— 

(a)  during  the  course  of  any  investigation  of  the  affairs  and  other  matters  of  or  relating  to  a 
company, other body corporate or person under section 210, section 212, section 213 or section 219 or 

146 

 
of  the  membership  and  other  matters  of  or  relating  to  a  company,  or  the  ownership  of  shares  in  or 
debentures of a company or body corporate, or the affairs and other matters of or relating to a company, 
other body corporate or person, under section 216; or 

(b)  during  the  pendency  of  any  proceeding  against  any  person  concerned  in  the  conduct  and 

management of the affairs of a company under Chapter XVI, 

such company, other body corporate or person proposes— 

(i) to discharge or suspend any employee; or 

(ii) to punish him, whether by dismissal, removal, reduction in rank or otherwise; or 

(iii) to change the terms of employment to his disadvantage, 

the company, other body corporate or person, as the case may be, shall obtain approval of the Tribunal of 
the action proposed against the employee and if the Tribunal has any objection to the action proposed, it 
shall send by post notice thereof in writing to the company, other body corporate or person concerned. 

(2) If the company, other body corporate or person concerned does not receive within thirty days of 
making of application under sub-section (1), the approval of the Tribunal, then and only then, the company, 
other body corporate or person concerned may proceed to take against the employee, the action proposed. 

(3) If the company, other body corporate or person concerned is dissatisfied with the objection raised 
by the Tribunal, it may, within a period of thirty days of the receipt of the notice of the objection, prefer an 
appeal to the Appellate Tribunal in such manner and on payment of such fees as may be prescribed. 

(4) The decision of the Appellate Tribunal on such appeal shall be final and binding on the Tribunal 

and on the company, other body corporate or person concerned. 

(5) For the removal of doubts, it is hereby declared that the provisions of this section shall have effect 

without prejudice to the provisions of any other law for the time being in force. 

219.  Power  of  inspector  to  conduct  investigation  into  affairs  of  related  companies,  etc.—If  an 
inspector  appointed  under  section  210  or  section  212  or  section  213  to  investigate  into  the  affairs  of  a 
company considers it necessary for the purposes of the investigation, to investigate also the affairs of— 

(a) any other body corporate which is, or has at any relevant time been the company’s subsidiary 

company or holding company, or a subsidiary company of its holding company; 

(b) any other body corporate which is, or has at any relevant time been managed by any person as 
managing director or as manager, who is, or was, at the relevant time, the managing director or the 
manager of the company; 

(c) any other body corporate whose Board of Directors comprises nominees of the company or is 
accustomed  to  act  in  accordance  with  the  directions  or  instructions  of  the  company  or  any  of  its 
directors; or 

(d) any person who is or has at any relevant time been the company’s managing director or manager 

or employee, 

he shall, subject to the prior approval of the Central Government, investigate into and report on the affairs 
of the other body corporate or of the managing director or manager, in so far as he considers that the results 
of his investigation are relevant to the investigation of the affairs of the company for which he is appointed. 

220.  Seizure  of  documents  by  inspector.—(1)  Where  in  the  course  of  an  investigation  under  this 
Chapter, the inspector has reasonable grounds to believe that the books and papers of, or relating to, any 
company  or  other  body  corporate  or  managing  director  or  manager  of  such  company  are  likely  to  be 
destroyed, mutilated, altered, falsified or secreted, the inspector may— 

(a) enter, with such assistance as may be required, the place or places where such books and papers 

are kept in such manner as may be required; and 

(b) seize books and papers as he considers necessary after allowing the company to take copies of, 

or extracts from, such books and papers at its cost for the purposes of his investigation. 

147 

 
(2) The inspector shall keep in his custody the books and papers seized under this section for such a 
period not later than the conclusion of the investigation as he considers necessary and thereafter shall return 
the same to the company or the other body corporate, or, as the case may be, to the managing director or 
the manager or any other person from whose custody or power they were seized: 

Provided that the inspector may, before returning such books and papers as aforesaid, take copies of, 
or extracts from them or place identification marks on them or any part thereof or deal with the same in 
such manner as he considers necessary. 

(3) The provisions of the Code of Criminal Procedure, 1973 (2 of 1974), relating to searches or seizures 

shall apply mutatis mutandis to every search or seizure made under this section. 

221.  Freezing  of  assets  of  company  on  inquiry  and  investigation.—(1)  Where  it  appears  to  the 
Tribunal,  on  a  reference  made  to  it  by  the  Central  Government  or  in  connection  with  any  inquiry  or 
investigation into the affairs of a company under this Chapter or on any complaint made by such number 
of  members  as  specified  under  sub-section  (1)  of  section  244  or  a  creditor  having  one  lakh  amount 
outstanding  against  the  company  or  any  other  person  having  a  reasonable  ground  to  believe  that  the 
removal, transfer or disposal of funds, assets, properties of the company is likely to take place in a manner 
that is prejudicial to the interests of the company or its shareholders or creditors or in public interest, it may 
by order direct that such transfer, removal or disposal shall not take place during such period not exceeding 
three years as may be specified in the order or may take place subject to such conditions and restrictions as 
the Tribunal may deem fit. 

(2)  In  case  of  any  removal,  transfer  or  disposal  of  funds,  assets,  or  properties  of  the  company  in 
contravention of the order of the Tribunal under sub-section (1), the company shall be punishable with fine 
which shall not be less than one 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  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 rupees, or with both. 

222. Imposition of restrictions upon securities.—(1) Where it appears to the Tribunal, in connection 
with any investigation under section 216 or on a complaint made by any person in this behalf, that there is 
good reason to find out the relevant facts about any securities issued or to be issued by a company and the 
Tribunal is of the opinion that such facts cannot be found out unless certain restrictions, as it may deem fit, 
are imposed, the Tribunal may, by order, direct that the securities shall be subject to such restrictions as it 
may deem fit for such period not exceeding three years as may be specified in the order. 

(2) Where securities in any company are issued or transferred or acted upon in contravention of an order 
of the Tribunal under sub-section (1), the company shall be punishable with fine which shall not be less 
than one 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 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. 

223. Inspector’s report.—(1) An inspector appointed under this Chapter may, and if so directed by 
the Central Government shall, submit interim reports to that Government, and on the conclusion of the 
investigation, shall submit a final report to the Central Government. 

(2) Every report made under sub-section (1) shall be in writing or printed as the Central Government 

may direct. 

(3) A copy of the report made under sub-section (1) may be obtained 1[by members, creditors or any 
other person whose interest is likely to be affected] by making an application in this regard to the Central 
Government. 

(4) The report of any inspector appointed under this Chapter shall be authenticated either— 

(a) 2[by the seal, if any] of the company whose affairs have been investigated; or 

1. Ins. by Act 1 of 2018, s. 72 (w.e.f. 9-2-2018). 
2. Subs. by Act 21 of 2015, s. 18, for “by the seal” (w.e.f. 29-5-2015). 

148 

 
                                                           
(b) by a certificate of a public officer having the custody of the report, as provided under section 

76 of the Indian Evidence Act, 1872 (1 of 1872), 

and such report shall be admissible in any legal proceeding as evidence in relation to any matter contained 
in the report. 

(5) Nothing in this section shall apply to the report referred to in section 212. 

224.  Actions to  be  taken in  pursuance  of inspector’s report.—(1)  If,  from  an  inspector’s  report, 
made  under  section  223,  it  appears  to  the  Central  Government  that  any  person  has,  in  relation  to  the 
company or in relation to any other body corporate or other person whose affairs have been investigated 
under this Chapter been guilty of any offence for which he is criminally liable, the Central Government 
may prosecute such person for the offence and it shall be the duty of all officers and other employees of the 
company or body corporate to give the Central Government the necessary assistance in connection with the 
prosecution. 

(2)  If  any  company  or  other  body  corporate  is liable  to  be  wound  up  under  this  Act  1[or  under  the 
Insolvency and Bankruptcy Code, 2016 (31 of 2016)] and it appears to the Central Government from any 
such report made under section 223 that it is expedient so to do by reason of any such circumstances as are 
referred to in section 213, the Central Government may, unless the company or body corporate is already 
being wound up by the Tribunal, cause to be presented to the Tribunal by any person authorised by the 
Central Government in this behalf— 

(a) a petition for the winding up of the company or body corporate on the ground that it is just and 

equitable that it should be wound up; 

(b) an application under section 241; or 

(c) both. 

(3) If from any such report as aforesaid, it appears to the Central Government that proceedings ought, 
in  the  public  interest,  to  be  brought  by  the  company  or  any  body  corporate  whose  affairs  have  been 
investigated under this Chapter— 

(a)  for  the  recovery  of  damages  in  respect  of  any  fraud,  misfeasance  or  other  misconduct  in 
connection with the promotion or formation, or the management of the affairs, of such company or 
body corporate; or 

(b) for the recovery of any property of such company or body corporate which has been misapplied 

or wrongfully retained, 

the Central Government may itself bring proceedings for winding up in the name of such company or body 
corporate. 

(4) The Central Government, shall be indemnified by such company or body corporate against any 
costs or expenses incurred by it in, or in connection with, any proceedings brought by virtue of sub-section 
(3). 

(5) Where the report made by an inspector states that fraud has taken place in a company and due to 
such fraud any director, key  managerial personnel, other officer of the company or any other person or 
entity, has taken undue advantage or benefit, whether in the form of any asset, property or cash or in any 
other manner, the Central Government may file an application before the Tribunal for appropriate orders 
with regard to disgorgement of such asset, property, or cash, as the case may be, and also for holding such 
director,  key  managerial  personnel,  officer  or  other  person  liable  personally  without  any  limitation  of 
liability. 

225.  Expenses  of  investigation.—(1)  The  expenses  of,  and  incidental  to,  an  investigation  by  an 
inspector appointed by the Central Government under this Chapter other than expenses of inspection under 
section 214 shall be defrayed in the first instance by the Central Government, but shall be reimbursed by 
the following persons to the extent mentioned below, namely:— 

(a) any person who is convicted on a prosecution instituted, or who is ordered to pay damages or 
restore any property in proceedings brought, under section 224, to the extent that he may in the same 

1. Ins. by Act 31 of 2016, s. 255 and the Eleventh Schedule (w.e.f. 15-11-2016). 

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proceedings  be  ordered  to  pay  the  said  expenses  as  may  be  specified  by  the  court  convicting  such 
person, or ordering him to pay such damages or restore such property, as the case may be; 

(b) any company or body corporate in whose name proceedings are brought as aforesaid, to the 
extent of the amount or value of any sums or property recovered by it as a result of such proceedings; 

(c) unless, as a result of the investigation, a prosecution is instituted under section 224,— 

(i) any company, body corporate, managing director or manager dealt with by the report of the 

inspector; and 

(ii) the applicants for the investigation, where the inspector was appointed under section 213, 

to such extent as the Central Government may direct. 

(2) Any amount for which a company or body corporate is liable under clause (b) of sub-section (1) 

shall be a first charge on the sums or property mentioned in that clause. 

226.  Voluntary  winding  up  of  company,  etc.,  not  to  stop  investigation  proceedings.—An 
investigation  under  this  Chapter  may  be  initiated  notwithstanding,  and  no  such  investigation  shall  be 
stopped or suspended by reason only of, the fact that— 

(a) an application has been made under section 241; 

(b) the company has passed a special resolution for voluntary winding up; or 

(c) any other proceeding for the winding up of the company is pending before the Tribunal: 

Provided that where a winding up order is passed by the Tribunal in a proceeding referred to in clause 
(c), the inspector shall inform the Tribunal about the pendency of the investigation proceedings before him 
and the Tribunal shall pass such order as it may deem fit: 

Provided further that nothing in the winding up order shall absolve any director or other employee of 
the company from participating in the proceedings before the inspector or any liability as a result of the 
finding by the inspector. 

227. Legal advisors and bankers not to disclose certain information.—Nothing in this Chapter shall 
require the disclosure to the Tribunal or to the Central Government or to the Registrar or to an inspector 
appointed by the Central Government— 

(a) by a legal adviser, of any privileged communication made to him in that capacity, except as 

respects the name and address of his client; or 

(b) by the bankers of any company, body corporate, or other person, of any information as to the 

affairs of any of their customers, other than such company, body corporate, or person. 

228. Investigation, etc., of foreign companies.—The provisions of this Chapter shall apply mutatis 

mutandis to inspection, inquiry or investigation in relation to foreign companies. 

229.  Penalty  for  furnishing  false  statement,  mutilation,  destruction  of  documents.—Where  a 
person  who  is  required to  provide  an  explanation  or  make  a  statement  during  the  course  of inspection, 
inquiry or investigation, or an officer or other employee of a company or other body corporate which is also 
under investigation,— 

(a) destroys, mutilates or falsifies, or conceals or tampers or unauthorised removes, or is a party to 
the destruction, mutilation or falsification or concealment or tampering or unauthorised removal of, 
documents relating to the property, assets or affairs of the company or the body corporate; 

(b) makes, or is a party to the making of, a false entry in any document concerning the company or 

body corporate; or 

(c) provides an explanation which is false or which he knows to be false, 

he shall be punishable for fraud in the manner as provided in section 447. 

CHAPTER XV 

COMPROMISES, ARRANGEMENTS AND AMALGAMATIONS 
230.  Power  to  compromise  or  make  arrangements  with  creditors  and  members.—(1)  Where  a 
compromise or arrangement is proposed— 

150 

 
(a) between a company and its creditors or any class of them; or 

(b) between a company and its members or any class of them, 

the Tribunal may, on the application of the company or of any creditor or member of the company, or in 
the case of a company which is being wound up, of the liquidator,1[appointed under this Act or under the 
Insolvency and Bankruptcy Code, 2016 (31 of 2016), as the case may be,] order a meeting of the creditors 
or class of creditors, or of the members or class of members, as the case may be, to be called, held and 
conducted in such manner as the Tribunal directs. 

Explanation.—For  the  purposes  of  this  sub-section,  arrangement  includes  a  reorganisation  of  the 
company’s share capital by the consolidation of shares of different classes or by the division of shares into 
shares of different classes, or by both of those methods. 

(2) The company or any other person, by whom an application is made under sub-section (1), shall 

disclose to the Tribunal by affidavit— 

(a) all material facts relating to the company, such as the latest financial position of the company, 
the latest auditor’s report on the accounts of the company and the pendency of any investigation or 
proceedings against the company; 

(b) reduction of share capital of the company, if any, included in the compromise or arrangement; 

(c) any scheme of corporate debt restructuring consented to by not less than seventy-five per cent. 

of the secured creditors in value, including— 

(i) a creditor’s responsibility statement in the prescribed form; 

(ii) safeguards for the protection of other secured and unsecured creditors; 

(iii) report by the auditor that the fund requirements of the company after the corporate debt 
restructuring as approved shall conform to the liquidity test based upon the estimates provided to 
them by the Board; 

(iv) where the company proposes to adopt the corporate debt restructuring guidelines specified 

by the Reserve Bank of India, a statement to that effect; and 

(v)  a  valuation  report  in  respect  of  the  shares  and  the  property  and  all  assets,  tangible  and 

intangible, movable and immovable, of the company by a registered valuer. 

(3) Where a meeting is proposed to be called in pursuance of an order of the Tribunal under           sub-
section (1), a notice of such meeting shall be sent to all the creditors or class of creditors and to all the 
members  or  class  of  members  and  the  debenture-holders  of  the  company,  individually  at  the  address 
registered  with  the  company  which  shall  be    accompanied  by  a  statement  disclosing  the  details  of  the 
compromise or arrangement, a copy of the valuation report, if any, and explaining their effect on creditors, 
key managerial personnel, promoters and non-promoter members, and the debenture-holders and the effect 
of the compromise or arrangement on any material interests of the directors of the company or the debenture 
trustees, and such other matters as may be prescribed: 

Provided that such notice and other documents shall also be placed on the website of the company, if 
any, and in case of a listed company, these documents shall be sent to the Securities and Exchange Board 
and stock exchange where the securities of the companies are listed, for placing on their website and shall 
also be published in newspapers in such manner as may be prescribed: 

Provided further that where the notice for the meeting is also issued by way of an advertisement, it shall 
indicate the time within which copies of the compromise or arrangement shall be made available to the 
concerned persons free of charge from the registered office of the company. 

(4) A notice under sub-section (3) shall provide that the persons to whom the notice is sent may vote in 
the meeting either themselves or through proxies or by postal ballot to the adoption of the compromise or 
arrangement within one month from the date of receipt of such notice: 

1. Ins. by Act 31 of 2016, s. 255 and the Eleventh Schedule (w.e.f. 15-11-2016). 

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Provided that any objection to the compromise or arrangement shall be made only by persons holding 
not less than ten per cent. of the shareholding or having outstanding debt amounting to not less than five 
per cent. of the total outstanding debt as per the latest audited financial statement. 

(5) A notice under sub-section (3) along with all the documents in such form as may be prescribed shall 
also be sent to the Central Government, the income-tax authorities, the Reserve Bank of India, the Securities 
and Exchange Board, the Registrar, the respective stock exchanges, the Official Liquidator, the Competition 
Commission of India established under sub-section (1) of section 7 of the Competition Act, 2002 (12 of 
2003), if necessary, and such other sectoral regulators or authorities which are likely to be affected by the 
compromise or arrangement and shall require that representations, if any, to be made by them shall be made 
within a period of thirty days from the date of receipt of such notice, failing which, it shall be presumed 
that they have no representations to make on the proposals. 

(6) Where, at a meeting held in pursuance of sub-section (1), majority of persons representing three-
fourths in value of the creditors, or class of creditors or members or class of members, as the case may be, 
voting  in  person  or  by  proxy  or  by  postal  ballot,  agree  to  any  compromise  or  arrangement  and  if  such 
compromise or arrangement is sanctioned by the Tribunal by an order, the same shall be binding on the 
company, all the creditors, or class of creditors or members or class of members, as the case may be, or, in 
case of a company being wound up, on the liquidator 1[appointed under this act or under the Insolvency and 
Bankruptcy Code, 2016 (31 of 2016), as the case may be,] and the contributories of the company. 

(7) An order made by the Tribunal under sub-section (6) shall provide for all or any of the following 

matters, namely:— 

(a) where the compromise or arrangement provides for conversion of preference shares into equity 
shares, such preference shareholders shall be given an option to either obtain arrears of dividend in cash 
or accept equity shares equal to the value of the dividend payable; 

(b) the protection of any class of creditors; 
(c) if the compromise or arrangement results in the variation of the shareholders’ rights, it shall be 

given effect to under the provisions of section 48; 

(d)  if  the  compromise  or  arrangement  is  agreed  to  by  the  creditors  under  sub-section  (6),  any 
proceedings pending before the Board for Industrial and Financial Reconstruction established under 
section 4 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) shall abate; 

(e) such other matters including exit offer to dissenting shareholders, if any, as are in the opinion 

of the Tribunal necessary to effectively implement the terms of the compromise or arrangement: 
Provided that no compromise or arrangement shall be sanctioned by the Tribunal unless a certificate 
by the company's auditor has been filed with the Tribunal to the effect that the accounting treatment, if any, 
proposed  in  the  scheme  of  compromise  or  arrangement  is  in  conformity  with  the  accounting  standards 
prescribed under section 133. 

(8) The order of the Tribunal shall be filed with the Registrar by the company within a period of thirty 

days of the receipt of the order. 

(9) The Tribunal may dispense with calling of a meeting of creditor or class of creditors where such 
creditors or class of creditors, having at least ninety per cent. value, agree and confirm, by way of affidavit, 
to the scheme of compromise or arrangement. 

(10) No compromise or arrangement in respect of any buy-back of securities under this section shall be 

sanctioned by the Tribunal unless such buy-back is in accordance with the provisions of section 68. 

(11)  Any  compromise  or  arrangement  may  include  takeover  offer  made  in  such  manner  as  may  be 

prescribed: 

Provided that in case of listed companies, takeover offer shall be as per the regulations framed by the 

Securities and Exchange Board. 

(12) An aggrieved party may make an application to the Tribunal in the event of any grievances with 
respect to the takeover offer of companies other than listed companies in such manner as may be prescribed 
and the Tribunal may, on application, pass such order as it may deem fit. 

1. Ins. by Act 31 of 2016, s. 255 and The Eleventh Schedule (w.e.f. 15-11-2016). 

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Explanation.—For the removal of doubts, it is hereby declared that the provisions of section 66 shall 
not apply to the reduction of share capital effected in pursuance of the order of the Tribunal under this 
section. 

231. Power of Tribunal to enforce compromise or arrangement.—(1) Where the Tribunal makes 

an order under section 230 sanctioning a compromise or an arrangement in respect of a company, it— 
(a) shall have power to supervise the implementation of the compromise or arrangement; and 
(b) may, at the time of making such order or at any time thereafter, give such directions in regard 
to  any  matter  or  make  such  modifications  in  the  compromise  or  arrangement  as  it  may  consider 
necessary for the proper implementation of the compromise or arrangement. 
(2) If the Tribunal is satisfied that the compromise or arrangement sanctioned under section 230 cannot 
be implemented satisfactorily with or without modifications, and the company is unable to pay its debts as 
per the scheme, it may make an order for winding up the company and such an order shall be deemed to be 
an order made under section 273. 

(3) The provisions of this section shall, so far as may be, also apply to a company in respect of which 
an order has been made before the commencement of this Act sanctioning a compromise or an arrangement. 
232. Merger and amalgamation of companies.—(1) Where an application is made to the Tribunal 
under section 230 for the sanctioning of a compromise or an arrangement proposed between a company 
and any such persons as are mentioned in that section, and it is shown to the Tribunal— 

(a) that the compromise or arrangement has been proposed for the purposes of, or in connection 
with,  a  scheme  for  the  reconstruction  of  the  company  or  companies  involving  merger  or  the 
amalgamation of any two or more companies; and 

(b) that under the scheme, the whole or any part of the undertaking, property or liabilities of any 
company (hereinafter referred to as the transferor company) is required to be transferred to another 
company (hereinafter referred to as the transferee company), or is proposed to be divided among and 
transferred to two or more companies, 

the Tribunal may on such application, order a meeting of the creditors or class of creditors or the members 
or class of members, as the case may be, to be called, held and conducted in such manner as the Tribunal 
may direct and the provisions of sub-sections (3) to (6) of section 230 shall apply mutatis mutandis. 

(2) Where an order has been made by the Tribunal under sub-section (1), merging companies or the 
companies in respect of which a division is proposed, shall also be required to circulate the following for 
the meeting so ordered by the Tribunal, namely:— 

(a) the draft of the proposed terms of the scheme drawn up and adopted by the directors of the 

merging company; 

(b) confirmation that a copy of the draft scheme has been filed with the Registrar; 
(c) a report adopted by the directors of the merging companies explaining effect of compromise on 
each class of shareholders, key managerial personnel, promoters and non-promoter shareholders laying 
out in particular the share exchange ratio, specifying any special valuation difficulties; 

(d) the report of the expert with regard to valuation, if any; 
(e) a supplementary accounting statement if the last annual accounts of any of the merging company 
relate  to  a  financial  year  ending  more  than  six  months  before  the  first  meeting  of  the  company 
summoned for the purposes of approving the scheme. 
(3) The Tribunal, after satisfying itself that the procedure specified in sub-sections (1) and (2) has been 
complied with, may, by order, sanction the compromise or arrangement or by a subsequent order, make 
provision for the following matters, namely:— 

(a) the transfer to the transferee company of the whole or any part of the undertaking, property or 
liabilities of the transferor company from a date to be determined by the parties unless the Tribunal, for 
reasons to be recorded by it in writing, decides otherwise; 

(b) the allotment or appropriation by the transferee company of any shares, debentures, policies or 
other like instruments in the company which, under the compromise or arrangement, are to be allotted 
or appropriated by that company to or for any person: 

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Provided that a transferee company shall not, as a result of the compromise or arrangement, hold 
any shares in its own name or in the name of any trust whether on its behalf or on behalf of any of its 
subsidiary or associate companies and any such shares shall be cancelled or extinguished; 

(c) the continuation by or against the transferee company of any legal proceedings pending by or 

against any transferor company on the date of transfer; 

(d) dissolution, without winding-up, of any transferor company; 

(e) the provision to be made for any persons who, within such time and in such  manner  as the 

Tribunal directs, dissent from the compromise or arrangement; 

(f) where share capital is held by any non-resident shareholder under the foreign direct investment 
norms or guidelines specified by the Central Government or in accordance with any law for the time 
being in force, the allotment of shares of the transferee company to such shareholder shall be in the 
manner specified in the order; 

(g) the transfer of the employees of the transferor company to the transferee company; 

(h) where the transferor company is a listed company and the transferee company is an unlisted 

company,— 

(A) the transferee company shall remain an unlisted company until it becomes a listed company; 

(B)  if  shareholders  of  the  transferor  company  decide  to  opt  out  of  the  transferee  company, 
provision  shall  be  made  for  payment  of  the  value  of  sharesheld  by  them  and  other  benefits  in 
accordance with a pre-determined price formula or after a valuation is made, and the arrangements 
under this provision may be made by the Tribunal: 

Provided that the amount of payment or valuation under this clause for anyshare shall not be less 
than what has been specified by the Securities and Exchange Board under any regulations framed by 
it; 

(i) where the transferor company is dissolved, the fee, if any, paid by the transferor company on its 
authorised capital shall be set-off against any fees payable by the transferee company on its authorised 
capital subsequent to the amalgamation; and 

(j) such incidental, consequential and supplemental matters as are deemed necessary to secure that 

the merger or amalgamation is fully and effectively carried out: 

Provided that no compromise or arrangement shall be sanctioned by the Tribunal unless a certificate 
by the company’s auditor has been filed with the Tribunal to the effect that the accounting treatment, 
if any, proposed in the scheme of compromise or arrangement is in conformity with the accounting 
standards prescribed under section 133. 

(4) Where an order under this section provides for the transfer of any property or liabilities, then, by 
virtue of the order, that property shall be transferred to the transferee company and the liabilities shall be 
transferred to and become the liabilities of the transferee company and any property may, if the order so 
directs, be freed from any charge which shall by virtue of the compromise or arrangement, cease to have 
effect. 

(5) Every company in relation to which the order is made shall cause a certified copy of the order to be 

filed with the Registrar for registration within thirty days of the receipt of certified copy of the order. 

(6)  The  scheme  under  this  section  shall  clearly  indicate  an  appointed  date  from  which  it  shall  be 
effective and the scheme shall be deemed to be effective from such date and not at a date subsequent to the 
appointed date. 

(7) Every company in relation to which the order is made shall, until the completion of the scheme, file 
a statement in such form and within such time as may be prescribed with the Registrar every year duly 
certified  by  a  chartered  accountant  or  a  cost  accountant  or  a  company  secretary  in  practice  indicating 
whether the scheme is being complied with in accordance with the orders of the Tribunal or not. 

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1[(8)  If a company fails to comply with sub-section (5), the company and every officer of the company 
who is in default shall be liable to a penalty of twenty thousand rupees, and where the failure is a continuing 
one, with a further penalty of one thousand rupees for each day after the first during which such failure 
continues, subject to a maximum of three lakh rupees.] 

Explanation.—For the purposes of this section,— 

(i) in  a  scheme  involving  a  merger,  where  under  the  scheme  the  undertaking,  property  and 
liabilities of one or more companies, including the company in respect of which the compromise 
or arrangement is proposed, are to be transferred to another existing company, it is a merger by 
absorption, or where the undertaking, property and liabilities of two or more companies, including 
the company in respect of which the compromise or arrangement is proposed, are to be transferred 
to a new company, whether or not a public company, it is a merger by formation of a new company; 

(ii) references to merging companies are in relation to a merger by absorption, to the transferor 
and  transferee  companies,  and,  in  relation  to  a  merger  by  formation  of  a  new  company,  to  the 
transferor companies; 

(iii)  a  scheme  involves  a  division,  where  under  the  scheme  the  undertaking,  property  and 
liabilities of the company in respect of which the compromise or arrangement is proposed are to be 
divided  among  and  transferred  to  two  or  more  companies  each  of  which  is  either  an  existing 
company or a new company; and 

(iv)  property  includes  assets,  rights  and interests  of  every  description and liabilities  include 

debts and obligations of every description. 

233. Merger or amalgamation of certain companies.—(1) Notwithstanding the provisions of section 
230 and section 232, a scheme of merger or amalgamation may be entered into between two or more small 
companies or between a holding company and its wholly-owned subsidiary company or such other class or 
classes of companies as may be prescribed, subject to the following, namely:— 

(a) a notice of the proposed scheme inviting objections or suggestions, if any, from the Registrar 
and Official Liquidators where registered office of the respective companies are situated or persons 
affected by the scheme within thirty days is issued by the transferor company or companies and the 
transferee company; 

(b) the objections and suggestions received are considered by the companies in their respective 
general  meetings  and  the  scheme  is  approved  by  the  respective  members  or  class  of  members  at  a 
general meeting holding at least ninety per cent. of the total number of shares; 

(c) each of the companies involved in the merger files a declaration of solvency, in the prescribed 

form, with the Registrar of the place where the registered office of the company is situated; and 

(d) the scheme is approved by majority representing nine-tenths in value of the creditors or class 
of creditors of respective companies indicated in a meeting convened by the company by giving a notice 
of twenty-one days along with the scheme to its creditors for the purpose or otherwise approved in 
writing. 

(2)  The  transferee  company  shall  file  a  copy  of  the  scheme  so  approved  in  the  manner  as  may  be 
prescribed, with the Central Government, Registrar and the Official Liquidator where the registered office 
of the company is situated. 

(3)  On  the  receipt  of  the  scheme,  if  the  Registrar  or  the  Official  Liquidator  has  no  objections  or 
suggestions to the scheme, the Central Government shall register the same and issue a confirmation thereof 
to the companies. 

(4) If the Registrar or Official Liquidator has any objections or suggestions, he may communicate the 

same in writing to the Central Government within a period of thirty days: 

1. Subs. by Act 29 of 2020, s. 42, for sub-section (8) (w.e.f. 21-12-2020). 

155 

 
                                                           
Provided that if no such communication is made, it shall be presumed that he has no objection to the 

scheme. 

(5) If the Central Government after receiving the objections or suggestions or for any reason is of the 
opinion that such a scheme is not in public interest or in the interest of the creditors, it may file an application 
before the Tribunal within a period of sixty days of the receipt of the scheme under sub-section (2) stating 
its objections and requesting that the Tribunal may consider the scheme under section 232. 

(6) On receipt of an application from the Central Government or from any person, if the Tribunal, for 
reasons to be recorded in writing, is of the opinion that the scheme should be considered as per the procedure 
laid down in section 232, the Tribunal may direct accordingly or it may confirm the scheme by passing 
such order as it deems fit: 

Provided that if the Central Government does not have any objection to the scheme or it does not file 
any application under this section before the Tribunal, it shall be deemed that it has no objection to the 
scheme. 

(7) A copy of the order under sub-section (6) confirming the scheme shall be communicated to the 
Registrar having jurisdiction over the transferee company and the persons concerned and the Registrar shall 
register  the  scheme  and  issue  a  confirmation  thereof  to  the  companies  and  such  confirmation  shall  be 
communicated to the Registrars where transferor company or companies were situated. 

(8) The registration of the scheme under sub-section (3) or sub-section (7) shall be deemed to have the 

effect of dissolution of the transferor company without process of winding-up. 

(9) The registration of the scheme shall have the following effects, namely:— 

(a) transfer of property or liabilities of the transferor company to the transferee company so that 
the property becomes the property of the transferee company and the liabilities become the liabilities 
of the transferee company; 

(b) the charges, if any, on the property of the transferor company shall be applicable and enforceable 

as if the charges were on the property of the transferee company; 

(c) legal proceedings by or against the transferor company pending before any court of law shall 

be continued by or against the transferee company; and 

(d)  where  the  scheme  provides  for  purchase  of  shares  held  by  the  dissenting  shareholders  or 
settlement of debt due to dissenting creditors, such amount, to the extent it is unpaid, shall become the 
liability of the transferee company. 

(10) A transferee company shall not on merger or amalgamation, hold any shares in its own name or in 
the name of any trust either on its behalf or on behalf of any of its subsidiary or associate company and all 
such shares shall be cancelled or extinguished on the merger or amalgamation. 

(11)  The  transferee  company  shall  file  an  application  with  the  Registrar  along  with  the  scheme 

registered, indicating the revised authorised capital and pay the prescribed fees due on revised capital: 

Provided that the fee, if any, paid by the transferor company on its authorised capital prior to its merger 
or amalgamation with the transferee company shall be set-off against the fees payable by the transferee 
company on its authorised capital enhanced by the merger or amalgamation. 

(12) The provisions of this section shall mutatis mutandis apply to a company or companies specified 
in sub-section (1) in respect of a scheme of compromise or arrangement referred to in section 230 or division 
or transfer of a company referred to clause (b) of sub-section (1) of section 232. 

(13)  The  Central  Government  may  provide  for  the  merger  or  amalgamation  of  companies  in  such 

manner as may be prescribed. 

(14) A company covered under this section may use the provisions of section 232 for the approval of 

any scheme for merger or amalgamation. 

234.  Merger  or  amalgamation  of  company  with  foreign  company.—(1)  The  provisions  of  this 
Chapter  unless otherwise  provided  under  any  other law  for  the time  being  in force,  shall  apply  mutatis 

156 

 
mutandis  to  schemes  of  mergers  and  amalgamations  between  companies  registered  under  this  Act  and 
companies incorporated in the jurisdictions of such countries as may be notified from time to time by the 
Central Government: 

Provided that the Central Government may make rules, in consultation with the Reserve Bank of India, 

in connection with mergers and amalgamations provided under this section. 

(2) Subject to the provisions of any other law for the time being in force, a foreign company, may with 
the prior approval of the Reserve Bank of India, merge into a company registered under this Act or  vice 
versa  and  the  terms  and  conditions  of  the  scheme  of  merger  may  provide,  among  other  things,  for  the 
payment of consideration to the shareholders of the merging company in cash, or in Depository Receipts, 
or partly in cash and partly in Depository Receipts, as the case may be, as per the scheme to be drawn up 
for the purpose. 

Explanation.—For  the  purposes  of  sub-section  (2),  the  expression  “foreign  company”  means  any 
company or body corporate incorporated outside India whether having a place of business in India or not. 

235. Power to acquire shares of shareholders dissenting from scheme or  contract approved by 
majority.—(1)  Where  a  scheme  or  contract involving  the  transfer of  shares  or  any  class  of  shares  in a 
company (the transferor company) to another company (the transferee company) has, within four months 
after making of an offer in that behalf by the transferee company, been approved by the holders of not less 
than nine-tenths in value of the shares whose transfer is involved, other than shares already held at the date 
of  the  offer  by,  or  by  a  nominee  of  the  transferee  company  or  its  subsidiary  companies,  the  transferee 
company may, at any time within two months after the expiry of the said four months, give notice in the 
prescribed manner to any dissenting shareholder that it desires to acquire his shares. 

(2) Where a notice under sub-section (1) is given, the transferee company shall, unless on an application 
made by the dissenting shareholder to the Tribunal, within one month from the date on which the notice 
was given and the Tribunal thinks fit to order otherwise, be entitled to and bound to acquire those shares 
on the terms on which, under the scheme or contract, the shares of the approving shareholders are to be 
transferred to the transferee company. 

(3) Where a notice has been given by the transferee company under sub-section (1) and the Tribunal 
has not, on an application made by the dissenting shareholder, made an order to the contrary, the transferee 
company shall, on the expiry of one month from the date on which the notice has been given, or, if an 
application to the Tribunal by the dissenting shareholder is then pending, after that application has been 
disposed of, send a copy of the notice to the transferor company together with an instrument of transfer, to 
be executed on behalf of the shareholder by any person appointed by the transferor company and on its own 
behalf  by  the  transferee  company,  and  pay  or  transfer  to  the  transferor  company  the  amount  or  other 
consideration representing the price payable by the transferee company for the shares which, by virtue of 
this section, that company is entitled to acquire, and the transferor company shall— 

(a) thereupon register the transferee company as the holder of those shares; and 

(b) within one month of the date of such registration, inform the dissenting shareholders of the fact 
of  such  registration  and  of  the  receipt  of  the  amount  or  other  consideration  representing  the  price 
payable to them by the transferee company. 

(4) Any sum received by the transferor company under this section shall be paid into a separate bank 
account, and any such sum and any other consideration so received shall be held by that company in trust 
for the several persons entitled to the shares in respect of which the said sum or other consideration were 
respectively received and shall be disbursed to the entitled shareholders within sixty days. 

(5) In relation to an offer made by a transferee company to shareholders of a transferor company before 
the commencement of this Act, this section shall have effect with the following modifications, namely:— 

(a) in sub-section (1), for the words “the shares whose transfer is involved other than shares already 
held at the date of the offer by, or by a nominee of, the transferee company or its subsidiaries,”, the 
words “the shares affected” shall be substituted; and 

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(b) in sub-section (3), the words “together with an instrument of transfer, to be executed on behalf 
of the shareholder by any person appointed by the transferee company and on its own behalf by the 
transferor company” shall be omitted. 

Explanation.—For the purposes of this section, “dissenting shareholder” includes a shareholder who 
has not assented to the scheme or contract and any shareholder who has failed or refused to transfer his 
shares to the transferee company in accordance with the scheme or contract. 

236. Purchase of minority shareholding.—(1) In the event of an acquirer, or a person acting in concert 
with such acquirer, becoming registered holder of ninety per cent. or more of the issued equity share capital 
of a company, or in the event of any person or group of persons becoming ninety per cent. majority or 
holding ninety per cent. of the issued equity share capital of a company, by virtue of an amalgamation, 
share exchange, conversion of securities or for any other reason, such acquirer, person or group of persons, 
as the case may be, shall notify the company of their intention to buy the remaining equity shares. 

(2)  The  acquirer,  person  or  group  of  persons  under  sub-section  (1)  shall  offer  to  the  minority 
shareholders of the company for buying the equity shares held by such shareholders at a price determined 
on the basis of valuation by a registered valuer in accordance with such rules as may be prescribed. 

(3) Without prejudice to the provisions of sub-sections (1) and (2), the minority shareholders of the 
company  may  offer  to  the  majority  shareholders  to  purchase  the  minority  equity  shareholding  of  the 
company at the price determined in accordance with such rules as may be prescribed under sub-section (2). 

(4) The majority shareholders shall deposit an amount equal to the value of shares to be acquired by 
them under sub-section (2) or sub-section (3), as the case may be, in a separate bank account to be operated 
by the  1[company whose shares are being transferred] for at least one year for payment  to the minority 
shareholders and such amount shall be disbursed to the entitled shareholders within sixty days: 

Provided that such disbursement shall continue to be made to the entitled shareholders for a period of 
one year, who for any reason had not been made disbursement within the said period of sixty days or if the 
disbursement have been made within the aforesaid period of sixty days, fail to receive or claim payment 
arising out of such disbursement. 

(5) In the event of a purchase under this section, the  2[company whose shares are being transferred] 
shall act as a transfer agent for receiving and paying the price to the minority shareholders and for taking 
delivery of the shares and delivering such shares to the majority, as the case may be. 

(6) In the absence of a physical delivery of shares by the shareholders within the time specified by the 
company, the share certificates shall be deemed to be cancelled, and the 1[company whose shares are being 
transferred] shall be authorised to issue shares in lieu of the cancelled shares and complete the transfer in 
accordance  with  law  and  make  payment  of  the  price  out  of  deposit  made  under  sub-section  (4)  by  the 
majority in advance to the minority by dispatch of such payment. 

(7) In the event of a majority shareholder or shareholders requiring a full purchase and making payment 
of price by deposit with the company for any shareholder or shareholders who have died or ceased to exist, 
or whose heirs, successors, administrators or assignees have not been brought on record by transmission, 
the right of such shareholders to make an offer for sale of minority equity shareholding shall continue and 
be available for a period of three years from the date of majority acquisition or majority shareholding. 

(8) Where the shares of minority shareholders have been acquired in pursuance of this section and as 
on or prior to the date of transfer following such acquisition, the shareholders holding seventy-five per cent. 
or more minority equity shareholding negotiate or reach an understanding on a higher price for any transfer, 
proposed or agreed upon, of the shares held by them without disclosing the fact or likelihood of transfer 
taking place on the basis of such negotiation, understanding or agreement, the majority shareholders shall 
share the additional compensation so received by them with such minority shareholders on a pro rata basis. 

1. Subs. by Act 1 of 2018, s. 73, for “transferor company” (w.e.f. 9-2-2018). 
2. Subs. by Act 1 of 2018, s. 73, for “transferor company” (w.e.f. 9-2-2018). 

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Explanation.—For  the  purposes  of  this  section,  the  expressions  “acquirer”  and  “person  acting  in 
concert” shall have the meanings respectively assigned to them in clause (b) and clause (e) of              sub-
regulation (1) of regulation 2 of the Securities and Exchange Board of India (Substantial Acquisition of 
Shares and Takeovers) Regulations, 1997. 

(9) When a shareholder or the majority equity shareholder fails to acquire full purchase of the shares 
of the minority equity shareholders, then, the provisions of this section shall continue to apply to the residual 
minority equity shareholders, even though,— 

(a) the shares of the company of the residual minority equity shareholder had been delisted; and 

(b) the period of one year or the period specified in the regulations made by the Securities and 
Exchange Board under the Securities and Exchange Board of India Act, 1992 (15 of 1992), had elapsed. 

237.  Power  of  Central  Government  to  provide  for  amalgamation  of  companies  in  public 
interest.—(1) Where the Central Government is satisfied that it is essential in the public interest that two 
or  more  companies  should  amalgamate,  the  Central  Government  may,  by  order  notified  in  the  Official 
Gazette, provide for the amalgamation of those companies into a single company with such constitution, 
with such property, powers, rights, interests, authorities and privileges, and with such liabilities, duties and 
obligations, as may be specified in the order. 

(2) The order under sub-section (1) may also provide for the continuation by or against the transferee 
company of any legal proceedings pending by or against any transferor company and such consequential, 
incidental and supplemental provisions as may, in the opinion of the Central Government, be necessary to 
give effect to the amalgamation. 

(3) Every member or creditor, including a debenture holder, of each of the transferor companies before 
the  amalgamation  shall  have,  as  nearly  as  may  be,  the  same  interest  in  or  rights  against  the  transferee 
company as he had in the company of which he was originally a member or creditor, and in case the interest 
or rights of such member or creditor in or against the transferee company are less than his interest in or 
rights  against  the  original  company,  he  shall  be  entitled  to  compensation  to  that  extent,  which  shall  be 
assessed by such authority as may be prescribed and every such assessment shall be published in the Official 
Gazette,  and  the  compensation  so  assessed  shall  be  paid  to  the  member  or  creditor  concerned  by  the 
transferee company. 

(4) Any person aggrieved by any assessment of compensation made by the prescribed authority under 
sub-section (3) may, within a period of thirty days from the date of publication of such assessment in the 
Official Gazette, prefer an appeal to the Tribunal and thereupon the assessment of the compensation shall 
be made by the Tribunal. 

(5) No order shall be made under this section unless— 

(a) a copy of the proposed order has been sent in draft to each of the companies concerned; 

(b) the time for preferring an appeal under sub-section (4) has expired, or where any such appeal 

has been preferred, the appeal has been finally disposed off; and 

(c) the Central Government has considered, and made such modifications, if any, in the draft order 
as it may deem fit in the light of suggestions and objections which may be received by it from any such 
company within such period as the Central Government may fix in that behalf, not being less than two 
months from the date on which the copy aforesaid is received by that company, or from any class of 
shareholders therein, or from any creditors or any class of creditors thereof. 

(6) The copies of every order made under this section shall, as soon as may be after it has been made, 

be laid before each House of Parliament. 

238. Registration of offer of schemes involving transfer of shares.—(1) In relation to every offer of 
a scheme or contract involving the transfer of shares or any class of shares in the transferor company to the 
transferee company under section 235,— 

159 

 
(a)  every  circular  containing  such  offer  and  recommendation  to  the  members  of  the  transferor 
company by its directors to accept such offer shall be accompanied by such information and in such 
manner as may be prescribed; 

(b) every such offer shall contain a statement by or on behalf of the transferee company, disclosing 

the steps it has taken to ensure that necessary cash will be available; and 

(c) every such circular shall be presented to the Registrar for registration and no such circular shall 

be issued until it is so registered: 

Provided  that  the  Registrar  may  refuse,  for  reasons  to  be  recorded  in  writing,  to  register  any  such 
circular which does not contain the information required to be given under clause (a) or which sets out such 
information  in  a  manner  likely  to  give  a  false  impression,  and  communicate  such  refusal  to  the  parties 
within thirty days of the application. 

(2) An appeal shall lie to the Tribunal against an order of the Registrar refusing to register any circular 

under sub-section (1). 

(3) The director who issues a circular which has not been presented for registration and registered under 

clause (c) of sub-section (1), shall be 1[liable to a penalty of one lakh rupees.] 

239. Preservation of books and papers of amalgamated companies.—The books and papers of a 
company which has been amalgamated with, or whose shares have been acquired by, another company 
under this Chapter shall not be disposed of without the prior permission of the Central Government and 
before granting such permission, that Government may appoint a person to examine the books and papers 
or any of them for the purpose of ascertaining whether they contain any evidence of the commission of an 
offence in connection with the promotion or formation, or the management of the affairs, of the transferor 
company or its amalgamation or the acquisition of its shares. 

240. Liability of officers in respect of offences committed prior to merger, amalgamation, etc.—
Notwithstanding anything in any other law for the time being in force, the liability in respect of offences 
committed  under  this  Act  by  the  officers  in  default,  of  the  transferor  company  prior  to  its  merger, 
amalgamation or acquisition shall continue after such merger, amalgamation or acquisition. 

CHAPTER XVI 

PREVENTION OF OPPRESSION AND MISMANAGEMENT 

241. Application to Tribunal for relief in cases of oppression, etc.—(1) Any member of a company 

who complains that— 

(a) the affairs of the company have been or are being conducted in a manner prejudicial to public 
interest or in a manner prejudicial or oppressive to him or any other member or members or in a manner 
prejudicial to the interests of the company; or 

(b) the material change, not being a change brought about by, or in the interests of, any creditors, 
including  debenture  holders  or  any  class  of  shareholders  of  the  company,  has  taken  place  in  the 
management or control of the company, whether by an alteration in the Board of Directors, or manager, 
or in the ownership of the company’s shares, or if it has no share capital, in its membership, or in any 
other manner whatsoever, and that by reason of such change, it is likely that the affairs of the company 
will be conducted in a manner prejudicial to its interests or its members or any class of members, 

may apply to the Tribunal, provided such member has a right to apply under section 244, for an order under 
this Chapter. 

(2) The Central Government, if it is of the opinion that the affairs of the company are being conducted 
in a manner prejudicial to public interest, it may itself apply to the Tribunal for an order under this Chapter. 

1. Subs. by Act 22 of 2019, s. 32, for “punishable with fine which shall not be less than twenty-five thousand rupees but which 

may extend to five lakh rupees” (w.e.f. 2-11-2018). 

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1[Provided that the applicants under this sub-section, in respect of such company or class of companies, 
as may be prescribed, shall be made before the Principal Bench of the Tribunal which shall be dealt with 
by such Bench.] 

1[(3) Where in the opinion of the Central Government there exist circumstances suggesting that— 

(a) any person concerned in the conduct and management of the affairs of a company is or has been 
in connection therewith guilty of fraud, misfeasance, persistent negligence or default in carrying out 
his obligations and functions under the law or of breach of trust; 

(b) the business of a company is not or has not been conducted and managed by such person in 

accordance with sound business principle or prudent commercial practices; 

(c) a company is or has been conducted and managed by such person in a manner which likely to 
cause, or has caused, serious injury or damage to the interest of the trade, industry or business to which 
such company pertains; or 

(d) the business of a company is or has been conducted and managed by such person with intent to 
default its creditors, members or any other person or otherwise for a fraudulent or unlawful purpose or 
in a manner prejudicial to public interest, 

the Central Government may intiate a case against such person and refer the same to the Tribunal with a 
request that the Tribunal may inquire into the case and record a decision as to whether or not such person 
is a fit and proper person to hold the officer of director or any other office connected with the conduct and 
management of any company. 

(4) The person against whom a case is referred to the Tribunal under sub-section (3), shall be jointed 

as a respondent to the application. 

(5) Every application under sub-section (3)— 

(a)  shall  contain  a  concise  statement  of  such  circumstances  and  materials  as  the  Central 

Government may consider necessary for the purpose of the inquiry; and 

(b) shall be signed and verified in the manner laid down in the Code of Civil Procedure (5 of 

1908), for the signature and verification of a plaint in a suit by the Central Government.] 

242. Powers of Tribunal.—(1) If, on any application made under section 241, the Tribunal is of the 

opinion— 

(a)  that  the  company’s  affairs  have  been  or  are  being  conducted  in  a  manner  prejudicial  or 
oppressive to any member or members or prejudicial to public interest or in a manner prejudicial to the 
interests of the company; and 

(b)  that  to  wind  up  the  company  would  unfairly  prejudice  such  member  or  members,  but  that 
otherwise the facts would justify the making of a winding-up order on the ground that it was just and 
equitable that the company should be wound up, 

the Tribunal may, with a view to bringing to an end the matters complained of, make such order as it thinks 
fit. 

(2) Without prejudice to the generality of the powers under sub-section (1), an order under that         sub-

section may provide for— 

(a) the regulation of conduct of affairs of the company in future; 

(b) the purchase of shares or interests of any members of the company by other members thereof 

or by the company; 

(c) in the case of a purchase of its shares by the company as aforesaid, the consequent reduction of 

its share capital; 

(d) restrictions on the transfer or allotment of the shares of the company; 

1. Ins. by Act 22 of 2019, s. 33 (w.e.f. 15-8-2019). 

161 

 
                                                           
(e) the termination, setting aside or modification, of any agreement, howsoever arrived at, between 
the company and the managing director, any other director or manager, upon such terms and conditions 
as may, in the opinion of the Tribunal, be just and equitable in the circumstances of the case; 

(f) the termination, setting aside or modification of any agreement between the company and any 

person other than those referred to in clause (e): 

Provided that no such agreement shall be terminated, set aside or modified except after due notice 

and after obtaining the consent of the party concerned; 

(g) the setting aside of any transfer, delivery of goods, payment, execution or other act relating to 
property made or done by or against the company within three months before the date of the application 
under  this  section,  which  would,  if  made  or    done  by  or  against  an  individual,  be  deemed  in  his 
insolvency to be a fraudulent preference; 

(h) removal of the managing director, manager or any of the directors of the company; 

(i) recovery of undue gains made by any managing director, manager or director during the period 
of his appointment as such and the manner of utilisation of the recovery including transfer to Investor 
Education and Protection Fund or repayment to identifiable victims; 

(j)  the  manner  in  which  the  managing  director  or  manager  of  the  company  may  be  appointed 
subsequent to an order removing the existing managing director or manager of the company made under 
clause (h); 

(k) appointment of such number of persons as directors, who may be required by the Tribunal to 

report to the Tribunal on such matters as the Tribunal may direct; 

(l) imposition of costs as may be deemed fit by the Tribunal; 

(m) any other matter for which, in the opinion of the Tribunal, it is just and equitable that provision 

should be made. 

(3) A certified copy of the order of the Tribunal under sub-section (1) shall be filed by the company 

with the Registrar within thirty days of the order of the Tribunal. 

(4) The Tribunal may, on the application of any party to the proceeding, make any interim order which 
it thinks fit for regulating the conduct of the company’s affairs upon such terms and conditions as appear 
to it to be just and equitable. 

1[(4A) At the conclusion of the hearing of the case in respect of sub-section (3) of section 241, the 
Tribunal shall record its decision stating therein specifically as to whether or not respondent is a fit and 
proper  person  to  hold  the  officer  of  director  or  any  other  officer  connected  with  the  conduct  and 
management of any company.] 

(5) Where an order of the Tribunal under sub-section (1) makes any alteration in the memorandum or 
articles of a company, then, notwithstanding any other provision of this Act, the company shall not have 
power, except to the extent, if any, permitted in the order, to make, without the leave of the Tribunal, any 
alteration whatsoever which is inconsistent with the order, either in the memorandum or in the articles. 

(6) Subject to the provisions of sub-section (1), the alterations made by the order in the memorandum 
or articles of a company shall, in all respects, have the same effect as if they had been duly made by the 
company in accordance with the provisions of this Act and the said provisions shall apply accordingly to 
the memorandum or articles so altered. 

(7)  A  certified  copy  of  every  order  altering,  or  giving  leave  to  alter,  a  company’s  memorandum  or 
articles, shall within thirty days after the making thereof, be filed by the company with the Registrar who 
shall register the same. 

(8) If a company contravenes the provisions of sub-section (5), the company shall be punishable with 
fine which shall not be less than one lakh rupees but which may extend to twenty-five lakh rupees and every 

1. Ins. by Act 22 of 2019, s. 34 (w.e.f. 15-8-2019). 

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officer of the company who is in default shall be punishable  1*** with fine which shall not be less than 
twenty-five thousand rupees but which may extend to 2[one lakh rupees]. 

243. Consequence of termination or modification of certain agreements.—(1) Where an order made 
under section 242 terminates, sets aside or modifies an agreement such as is referred to in sub-section (2) 
of that section,— 

(a) such order shall not give rise to any claims whatever against the company by any person for 
damages  or  for  compensation  for  loss  of  office  or  in  any  other  respect  either  in  pursuance  of  the 
agreement or otherwise; 

(b) no managing director or other director or manager whose agreement is so terminated or set aside 
shall, for a period of five years from the date of the order terminating or setting aside the agreement, 
without the leave of the Tribunal, be appointed, or act, as the managing director or other director or 
manager of the company: 

Provided that the Tribunal shall not grant leave under this clause unless notice of the intention to apply 
for leave has been served on the Central Government and that Government has been given a reasonable 
opportunity of being heard in the matter. 

3[(1A) The person who is not a fit and proper person pursuant to sub-section (4A) of section 242 shall 
not hold the officer of a director or any other officer connected with the conduct and management of the 
affairs of any other officer connected with the conduct and management of the affairs of any company for 
a period of five years from the date of the said decision: 

Provided that the Central Government may, with the leave of the Tribunal, permit such person to hold 

any such office before the expiry of the said period of five years. 

(1B) Notwithstanding anything contained in any other provisions of this Act, or any other law for the 
time being in force, or any contract, memorandum or articles, on the removal of a person from the officer 
of a director or any other officer connected with the conduct and management of the affairs of the company, 
that person shall not be entitled to, or be paid, any compensation for the loss or termination of officer.] 

(2) Any person who knowingly acts as a managing director or other director or manager of a company 
in  contravention  of  clause  (b)  of  sub-section  (1)  4[or  sub-section  (1A)],  and  every  other  director  of  the 
company who is knowingly a party to such contravention, shall be punishable  5*** with fine which may 
extend to 6[five lakh rupees]. 

244. Right to apply under section 241.—(1) The following members of a company shall have the 

right to apply under section 241, namely:— 

(a) in the case of a company having a share capital, not less than one hundred members of the 
company or not less than one-tenth of the total number of its members, whichever is less, or any member 
or members holding not less than one-tenth of the issued share capital of the company, subject to the 
condition that the applicant or applicants has or have paid all calls and other sums due on his or their 
shares; 

(b) in the case of a company not having a share capital, not less than one-fifth of the total number 

of its members: 

Provided that the Tribunal may, on an application made to it in this behalf, waive all or any of the 
requirements specified in clause (a) or clause (b) so as to enable the members to apply under section 241. 

Explanation.—For the purposes of this sub-section, where any share or shares are held by two or more 

persons jointly, they shall be counted only as one member. 

1.  The  words  “with  imprisonment  for  a  term  which  may  extend  to  six  months  or”  omitted  by  Act  29  of  2020,  s.  43                                     

(w.e.f. 21-12-2020). 

2. Subs. by s. 43, ibid., for “one lakh rupees, or with both” (w.e.f. 21-12-2020). 
3. Ins. by Act 22 of 2019, s. 35 (w.e.f. 15-8-2019). 
4. Ins. by Act 22 of 2019, s. 35 (w.e.f. 15-8-2019). 
5.  The  words  “with  imprisonment  for  a  term  which  may  extend  to  six  months  or”  omitted  by  Act  29  of  2020,  s.  44                              

(w.e.f. 21-12-2020). 

6. Subs. by s. 44, ibid., for “five lakh rupees, or with both” (w.e.f. 21-12-2020). 

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(2) Where any members of a company are entitled to make an application under sub-section (1), any 
one or more of them having obtained the consent in writing of the rest, may make the application on behalf 
and for the benefit of all of them. 

245. Class action.—(1) Such number of member or members, depositor or depositors or any class of 
them,  as  the  case  may  be,  as  are  indicated  in  sub-section  (2)  may,  if  they  are  of  the  opinion  that  the 
management or conduct of the affairs of the company are being conducted in a manner prejudicial to the 
interests of the company or its members or depositors, file an application before the Tribunal on behalf of 
the members or depositors for seeking all or any of the following orders, namely:— 

(a) to restrain the company from committing an act which is ultra vires the articles or memorandum 

of the company; 

(b)  to  restrain  the  company  from  committing  breach  of  any  provision  of  the  company’s 

memorandum or articles; 

(c)  to  declare  a  resolution  altering  the  memorandum  or  articles  of  the  company  as  void  if  the 
resolution was passed by suppression of material facts or obtained by mis-statement to the members or 
depositors; 

(d) to restrain the company and its directors from acting on such resolution; 

(e) to restrain the company from doing an act which is contrary to the provisions of this Act or any 

other law for the time being in force; 

(f) to restrain the company from taking action contrary to any resolution passed by the members; 

(g) to claim damages or compensation or demand any other suitable action from or against— 

(i) the company or its directors for any fraudulent, unlawful or wrongful act or omission or 

conduct or any likely act or omission or conduct on its or their part; 

(ii) the auditor including audit firm of the company for any improper or misleading statement 
of particulars made in his audit report or for any fraudulent, unlawful or wrongful act or conduct; 
or 

(iii) any expert or advisor or consultant or any other person for any incorrect or misleading 
statement made to the company or for any fraudulent, unlawful or wrongful act or conduct or any 
likely act or conduct on his part; 

(h) to seek any other remedy as the Tribunal may deem fit. 

(2) Where the members or depositors seek any damages or compensation or demand any other suitable 
action from or against an audit firm, the liability shall be of the firm as well as of each partner who was 
involved in making any improper or misleading statement of particulars in the audit report or who acted in 
a fraudulent, unlawful or wrongful manner. 
(3) (i) The requisite number of members provided in sub-section (1) shall be as under:— 

(a) in the case of a company having a share capital, not less than one hundred members of the 
company or not less than such percentage of the total number of its members as may be prescribed, 
whichever is less, or any member or members holding not less than such percentage of the issued share 
capital of the company as may be prescribed, subject to the condition that the applicant or applicants 
has or have paid all calls and other sums due on his or their shares; 

(b) in the case of a company not having a share capital, not less than one-fifth of the total number 

of its members. 

(ii) The requisite number of depositors provided in sub-section (1) shall not be less than one hundred 
depositors  or  not  less  than  such  percentage  of  the  total  number  of  depositors  as  may  be  prescribed, 
whichever  is  less,  or  any  depositor  or  depositors  to  whom  the  company  owes  such  percentage  of  total 
deposits of the company as may be prescribed. 

164 

 
(4)  In  considering  an  application  under  sub-section  (1),  the  Tribunal  shall  take  into  account,  in 

particular— 

(a) whether the member or depositor is acting in good faith in making the application for seeking 

an order; 

(b) any evidence before it as to the involvement of any person other than directors or officers of the 

company on any of the matters provided in clauses (a) to (f) of sub-section (1); 

(c) whether the cause of action is one which the member or depositor could pursue in his own right 

rather than through an order under this section; 

(d) any evidence before it as to the views of the members or depositors of the company who have 

no personal interest, direct or indirect, in the matter being proceeded under this section; 

(e) where the cause of action is an act or omission that is yet to occur, whether the act or omission 

could be, and in the circumstances would be likely to be— 

(i) authorised by the company before it occurs; or 

(ii) ratified by the company after it occurs; 

(f) where the cause of action is an act or omission that has already occurred, whether the act or 

omission could be, and in the circumstances would be likely to be, ratified by the company. 

(5) If an application filed under sub-section (1) is admitted, then the Tribunal shall have regard to the 

following, namely:— 

(a) public notice shall be served on admission of the application to all the members or depositors 

of the class in such manner as may be prescribed; 

(b)  all  similar  applications  prevalent  in  any  jurisdiction  should  be  consolidated  into  a  single 
application and the class members or depositors should be allowed to choose the lead applicant and in 
the event the members or depositors of the class are unable to come to a consensus, the Tribunal shall 
have  the  power  to  appoint  a  lead  applicant,  who  shall  be  in  charge  of  the  proceedings  from  the 
applicant’s side; 

(c) two class action applications for the same cause of action shall not be allowed; 

(d) the cost or expenses connected with the application for class action shall be defrayed by the 

company or any other person responsible for any oppressive act. 

(6) Any order passed by the Tribunal shall be binding on the company and all its members, depositors 
and auditor including audit firm or expert or consultant or advisor or any other person associated with the 
company. 

(7) Any company which fails to comply with an order passed by the Tribunal under this section 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 imprisonment for 
a term which may extend to three years and with fine which shall not be less than twenty-five thousand 
rupees but which may extend to one lakh rupees. 

(8) Where any application filed before the Tribunal is found to be frivolous or vexatious, it shall, for 
reasons to be recorded in writing, reject the application and make an order that the applicant shall pay to 
the opposite party such cost, not exceeding one lakh rupees, as may be specified in the order. 

(9) Nothing contained in this section shall apply to a banking company. 
(10) Subject to the compliance of this section, an application may be filed or any other action may be 
taken under this section by any person, group of persons or any association of persons representing the 
persons affected by any act or omission, specified in sub-section (1). 

246.  Application  of  certain  provisions  to  proceedings  under  section  241  or  section  245.—The 
provisions of sections 337 to 341 (both inclusive) shall apply mutatis mutandis, in relation to an application 
made to the Tribunal under section 241 or section 245. 

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CHAPTER XVII 
REGISTERED VALUERS 

247. Valuation by registered valuers.—(1) Where a valuation is required to be made in respect of any 
property, stocks, shares, debentures, securities or goodwill or any other assets (herein referred to as the 
assets) or net worth of a company or its liabilities under the provision of this Act, it shall be valued by  1[a 
person  having  such  qualifications  and  experience,  registered  as  a  valuer  and  being  a  member  of  an 
organisation recognised, in such manner, on such terms and conditions as may be prescribed] and appointed 
by the audit committee or in its absence by the Board of Directors of that company. 

(2) The valuer appointed under sub-section (1) shall,— 

(a) make an impartial, true and fair valuation of any assets which may be required to be valued; 
(b) exercise due diligence while performing the functions as valuer; 
(c) make the valuation in accordance with such rules as may be prescribed; and 
(d) not undertake valuation of any assets in which he has a direct or indirect interest or becomes so 
interested at any time 2[during a period of three years prior to his appointments as valuer or three years 
after the valuation of assets was conducted by him]. 
(3) If a valuer contravenes the provisions of this section or the rules made thereunder, the valuer shall 

be 3[liable to a penalty of fifty thousand rupees]: 

Provided that if the valuer has contravened such provisions with the intention to defraud the company 
or its members, he shall be punishable with imprisonment for a term which may extend to one year and 
with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees. 

(4) Where a valuer has been convicted under sub-section (3), he shall be liable to— 

(i) refund the remuneration received by him to the company; and 
(ii)  pay  for  damages  to  the  company  or  to  any  other  person  for  loss  arising  out  of  incorrect  or 

misleading statements of particulars made in his report. 

CHAPTER XVIII 
REMOVAL OF NAMES OF COMPANIES FROM THE REGISTER OF COMPANIES 

248. Power of Registrar to remove name of company from register of companies.—(1) Where the 

Registrar has reasonable cause to believe that— 

(a) a company has failed to commence its business within one year of its incorporation;4[or] 
5* 
* 
* 
(c)  a  company  is  not  carrying  on  any  business  or  operation  for  a  period  of  two  immediately 
preceding financial years and has not made any application within such period for obtaining the status 
of a dormant company under 6[section 455; or] 

* 

* 

7[(d) the subscribers to the memorandum have not paid the subscription which they had undertaken 
to pay at the time of incorporation of a company and a declaration to this effect has not been filed within 
one hundred and eighty days of its incorporation under sub-section (1) of section 10A; or 

(e)  the  company  is  not  carrying  on  any  business  or  operations,  as  revealed  after  the  physical 

verification carried out under sub-section (9) of section 12.] 

he shall send a notice to the company and all the directors of the company, of his intention to remove 
the  name  of  the  company  from  the  register  of  companies  and  requesting  them  to  send  their 
representations along with copies of the relevant documents, if any, within a period of thirty days from 
the date of the notice. 

1. Subs. by Notification No. S.O. 3400(E), s. 2 for certain words (w.e.f. 23-10-2017). 
2. Subs. by Act 1 of 2018, s. 74, for “during or after the valuation of assets” (w.e.f. 9-2-2018). 
3. Subs. by vide Notification No. S.O. 1303(E), for certain words (w.e.f. 24-3-2021). 
4. Ins. by Act 21 of 2015, s. 19 (w.e.f. 29-5-2015). 
5. Clause (b) omitted by s. 19, ibid. (w.e.f. 29-5-2015). 
6. Subs. by Act 22 of 2019, s. 36, for “section 455,” (w.e.f. 2-11-2018). 
7. Ins. by s. 36, ibid. (w.e.f. 2-11-2018). 

166 

 
 
 
 
 
 
 
 
 
                                                           
(2) Without prejudice to the provisions of sub-section (1), a company may, after extinguishing all its 
liabilities, by a special resolution or consent of seventy-five per cent. members in terms of paid-up share 
capital, file an application in the prescribed manner to the Registrar for removing the name of the company 
from the register of companies on all or any of the grounds specified in sub-section (1) and the Registrar 
shall, on receipt of such application, cause a public notice to be issued in the prescribed manner: 

Provided that in the case of a company regulated under a special Act, approval of the regulatory body 

constituted or established under that Act shall also be obtained and enclosed with the application. 

(3) Nothing in sub-section (2) shall apply to a company registered under section 8. 

(4) A notice issued under sub-section (1) or sub-section (2) shall be published in the prescribed manner 

and also in the Official Gazette for the information of the general public. 

(5) At the expiry of the time mentioned in the notice, the Registrar may, unless cause to the contrary is 
shown by the company, strike off its name from the register of companies, and shall publish notice thereof 
in the Official Gazette, and on the publication in the Official Gazette of this notice, the company shall stand 
dissolved. 

(6) The Registrar, before passing an order under sub-section (5), shall satisfy himself that sufficient 
provision  has  been  made  for  the  realisation  of  all  amount  due  to  the  company  and  for  the  payment  or 
discharge of its liabilities and obligations by the company within a reasonable time and, if necessary, obtain 
necessary undertakings from the managing director, director or other persons in charge of the management 
of the company: 

Provided that notwithstanding the undertakings referred to in this sub-section, the assets of the company 
shall be made available for the payment or discharge of all its liabilities and obligations even after the date 
of the order removing the name of the company from the register of companies. 

(7) The liability, if any, of every director, manager or other officer who was exercising any power of 
management, and of every member of the company dissolved under sub-section (5), shall continue and may 
be enforced as if the company had not been dissolved. 

(8) Nothing in this section shall affect the power of the Tribunal to wind up a company the name of 

which has been struck off from the register of companies. 

249.  Restrictions  on  making  application  under  section  248  in  certain  situations.—(1)  An 
application under sub-section (2) of section 248 on behalf of a company shall not be made if, at any time 
in the previous three months, the company— 

(a) has changed its name or shifted its registered office from one State to another; 

(b) has made a disposal for value of property or rights held by it, immediately before cesser of trade 
or otherwise carrying on of business, for the purpose of disposal for gain in the normal course of trading 
or otherwise carrying on of business; 

(c) has engaged in any other activity except the one which is necessary or expedient for the purpose 
of making an application under that section, or deciding whether to do so or concluding the affairs of 
the company, or complying with any statutory requirement; 

(d) has made an application to the Tribunal for the sanctioning of a compromise or arrangement 

and the matter has not been finally concluded; or 

1[(e) is being wound up under Chapter XX of this Act or under the Insolvency and Bankruptcy 

Code, 2016 (31 of 2016).] 

(2) If a company files an application under sub-section (2) of section 248 in violation of sub-section 

(1), it shall be punishable with fine which may extend to one lakh rupees. 

(3) An application filed under sub-section (2) of section 248 shall be withdrawn by the company or 

rejected by the Registrar as soon as conditions under sub-section (1) are brought to his notice. 

1. Subs. by Act 31 of 2016, s. 255 and the Eleventh Schedule, for clause (e) (w.e.f. 15-11-2016). 

167 

 
                                                           
250. Effect of company notified as dissolved.—Where a company stands dissolved under section 248, 
it shall on and from the date mentioned in the notice under sub-section (5) of that section cease to operate 
as a company and the Certificate of Incorporation issued to it shall be deemed to have been cancelled from 
such  date  except  for  the  purpose  of  realising  the  amount  due  to  the  company  and  for  the  payment  or 
discharge of the liabilities or obligations of the company. 

251. Fraudulent application for removal of name.—(1) Where it is found that an application by a 
company under sub-section (2) of section 248 has been made with the object of evading the liabilities of 
the company or with the intention to deceive the creditors or to defraud any other persons, the persons in 
charge of the management of the company shall, notwithstanding that the company has been notified as 
dissolved— 

(a) be jointly and severally liable to any person or persons who had incurred loss or damage as a 

result of the company being notified as dissolved; and 

(b) be punishable for fraud in the manner as provided in section 447. 

(2) Without prejudice to the provisions contained in sub-section (1), the Registrar may also recommend 
prosecution of the persons responsible for the filing of an application under sub-section (2) of section 248. 

252. Appeal to Tribunal.—(1) Any person aggrieved by an order of the Registrar, notifying a company 
as dissolved under section 248, may file an appeal to the Tribunal within a period of three years from the 
date of the order of the Registrar and if the Tribunal is of the opinion that the removal of the name of the 
company from the register of companies is not justified in view of the absence of any of the grounds on 
which the order was passed by the Registrar, it may order restoration of the name of the company in the 
register of companies: 

Provided  that  before  passing  any  order  under  this  section,  the  Tribunal  shall  give  a  reasonable 
opportunity of making representations and of being heard to the Registrar, the company and all the persons 
concerned: 

Provided further that if the Registrar is satisfied, that the name of the company has been struck off from 
the  register  of  companies  either  inadvertently  or  on  the  basis  of  incorrect  information  furnished  by  the 
company or its directors, which requires restoration in the register of companies, he may within a period of 
three  years  from  the  date  of  passing  of  the  order  dissolving  the  company  under  section  248,  file  an 
application before the Tribunal seeking restoration of name of such company. 

(2) A copy of the order passed by the Tribunal shall be filed by the company with the Registrar within 
thirty days from the date of the order and on receipt of the order, the Registrar shall cause the name of the 
company to be restored in the register of companies and shall issue a fresh certificate of incorporation. 

(3) If a company, or any member or creditor or workman thereof feels aggrieved by the company having 
its name struck off from the register of companies, the Tribunal on an application made by the company, 
member, creditor or workman before the expiry of twenty years from the publication in the Official Gazette 
of the notice under sub-section (5) of section 248 may, if satisfied that the company was, at the time of its 
name  being  struck  off,  carrying  on  business  or in  operation or  otherwise  it is just  that the  name  of  the 
company be restored to the register of companies, order the name of the company to be restored to the 
register  of  companies,  and  the  Tribunal  may,  by  the  order,  give  such  other  directions  and  make  such 
provisions as deemed just for placing the company and all other persons in the same position as nearly as 
may be as if the name of the company had not been struck off from the register of companies. 

CHAPTER XIX 
REVIVAL AND REHABILITATION OF SICK COMPANIES 

253. [Determination of sickness.] Omitted by the Insolvency and Bankruptcy Code, 2016 (31 of 2016), 

s. 255 and the Eleventh Schedule (w.e.f. 15-11-2016). 

254. [Application for revival and rehabilitation.] Omitted by s. 255 and the Eleventh Schedule, ibid. 

(w.e.f. 15-11-2016). 

255. [Exclusion of certain time in computing period of limitation.] Omitted by s. 255 and the Eleventh 

Schedule, ibid. (w.e.f. 15-11-2016). 

168 

 
256.  [Appointment  of  interim  administrator.]Omitted  by  s.  255  and  the  Eleventh  Schedule,  ibid.           

(w.e.f. 15-11-2016). 

257. [Committee of creditors.] Omitted by s. 255 and the Eleventh Schedule, ibid. (w.e.f. 15-11-2016). 
258. [Order of Tribunal.]Omitted by s. 255 and the Eleventh Schedule, ibid. (w.e.f. 15-11-2016). 
259. [Appointment of administrator.]Omitted by s. 255 and the Eleventh Schedule, ibid.                 (w.e.f. 

15-11-2016). 

260. [Powers and duties of company administrator.] Omitted by s. 255 and the Eleventh Schedule, ibid. 

(w.e.f. 15-11-2016). 

261.  [Scheme  of  revival  and  rehabilitation.]  Omitted  by  s.  255  and  the  Eleventh  Schedule,  ibid.              

(w.e.f. 15-11-2016). 

262. [Sanction of scheme.] Omitted by s. 255 and the Eleventh Schedule, ibid. (w.e.f. 15-11-2016). 
263. [Scheme to be binding.] Omitted by s. 255 and the Eleventh Schedule, ibid. (w.e.f. 15-11-2016). 
264. [Implementation of scheme.] Omitted by s. 255 and the Eleventh Schedule, ibid.                        (w.e.f. 

15-11-2016). 

265. [Winding up of company on report of company administrator.] Omitted by s. 255 and the Eleventh 

Schedule, ibid.(w.e.f. 15-11-2016). 

266. [Power of Tribunal to assess damages against delinquent directors, etc.] Omitted by the Insolvency 

and Bankruptcy Code, 2016 (31 of 2016), s. 255 and the Eleventh Schedule (w.e.f. 15-11-2016). 

267.[Punishment for certain offences.] Omitted by s. 255 and the Eleventh Schedule, ibid.           (w.e.f. 

15-11-2016). 

268. [Bar of jurisdiction.] Omitted by s. 255 and the Eleventh Schedule, ibid.(w.e.f. 15-11-2016). 
269.[Rehabilitation  and  insolvency  fund.]  Omitted  by  s.  255  and  the  Eleventh  Schedule,  ibid.             

(w.e.f. 15-11-2016). 

CHAPTER XX 

WINDING UP 

1[270.Winding up by Tribunal.—The provisions of Part I shall apply to the winding up of a company 

by the Tribunal under this Act.] 

PART I.—Winding up by the Tribunal 

2[271. Circumstances in which company may be wound up by Tribunal.—A company may, on a 

petition under section 272, be wound up by the Tribunal,— 

(a)  if  the  company  has,  by  special  resolution,  resolved  that  the  company  be  wound  up  by  the 

Tribunal;  

(b)  if  the  company  has  acted  against  the  interests  of  the  sovereignty  and  integrity  of  India,  the 

security of the State, friendly relations with foreign States, public order, decency or morality; 

(c)  if  on  an  application  made  by  the  Registrar  or  any  other  person  authorised  by  the  Central 
Government by notification under this Act, the Tribunal is of the opinion that the affairs of the company 
have been conducted in a fraudulent manner or the company was formed for fraudulent and unlawful 
purpose or the persons concerned in the formation or management of its affairs have been guilty of 
fraud, misfeasance or misconduct in connection therewith and that it is proper that the company be 
wound up;  

(d) if the company has made a default in filing with the Registrar its financial statements or annual 

returns for immediately preceding five consecutive financial years; or 

1. Subs. by Act 31 of 2016, s. 255 and the Eleventh Schedule, for section 270 (w.e.f. 15-11-2016). 
2. Subs. by s. 255 and the Eleventh Schedule, ibid., for section 271 (w.e.f. 15-11-2016). 

169 

 
                                                           
(e) if the Tribunal is of the opinion that it is just and equitable that the company should be wound 

up.] 

1[272. Petition for winding up.—(1) Subject to the provisions of this section, a petition to the Tribunal 

for the winding up of a company shall be presented by— 

(a) the company; 

(b) any contributory or contributories; 

(c) all or any of the persons specified in clauses (a) and (b); 

(d) the Registrar; 

(e) any person authorised by the Central Government in that behalf; or 

(f)  in  a  case  falling  under  clause  (b)  of  section  271,  by  the  Central  Government  or  a  State 

Government. 

(2)  A  contributory  shall  be  entitled  to  present  a  petition  for  the  winding  up  of  a  company, 
notwithstanding that he may be the holder of fully paid-up shares, or that the company may have no assets 
at all or may have no surplus assets left for distribution among the shareholders after the satisfaction of its 
liabilities, and shares in respect of which he is a contributory or some of them were either originally allotted 
to him or have been held by him, and registered in his name, for at least six months during the eighteen 
months immediately before the commencement of the winding up or have devolved on him through the 
death of a former holder. 

(3) The Registrar shall be entitled to present a petition for winding up under section 271, except on the 

grounds specified in clause (a) 2[of that section]: 

Provided  that  the  Registrar  shall  obtain  the  previous  sanction  of  the  Central  Government  to  the 

presentation of a petition: 

Provided further that the Central Government shall not accord its sanction unless the company has been 

given a reasonable opportunity of making representations. 

(4) A petition presented by the company for winding up before the Tribunal shall be admitted only if 

accompanied by a statement of affairs in such form and in such manner as may be prescribed. 

(5) A copy of the petition made under this section shall also be filed with the Registrar and the Registrar 
shall, without prejudice to any other provisions, submit his views to the Tribunal within sixty days of receipt 
of such petition.] 

273. Powers of Tribunal.—(1) The Tribunal may, on receipt of a petition for winding up under section 

272 pass any of the following orders, namely:— 

(a) dismiss it, with or without costs; 

(b) make any interim order as it thinks fit; 

(c) appoint a provisional liquidator of the company till the making of a winding up order; 

(d) make an order for the winding up of the company with or without costs; or 

(e) any other order as it thinks fit: 

Provided  that  an  order  under  this  sub-section  shall  be  made  within  ninety  days  from  the  date  of 

presentation of the petition: 

1. Subs. by Act 31 of 2016, s. 255 and the Eleventh Schedule, for section 272 (w.e.f. 15-11-2016). 
2. Subs. by Act 22 of 2019, s. 37, for “or clause (e) of that sub-section” (w.e.f. 15-8-2019). 

170 

 
                                                           
Provided further that before appointing a provisional liquidator under clause (c), the Tribunal shall give 
notice to the company and afford a reasonable opportunity to it to make its representations, if any, unless 
for special reasons to be recorded in writing, the Tribunal thinks fit to dispense with such notice: 

Provided also that the Tribunal shall not refuse to make a winding up order on the ground only that the 
assets of the company have been mortgaged for an amount equal to or in excess of those assets, or that the 
company has no assets. 

(2) Where a petition is presented on the ground that it is just and equitable that the company should be 
wound up, the Tribunal may refuse to make an order of winding up, if it is of the opinion that some other 
remedy is available to the petitioners and that they are acting unreasonably in seeking to have the company 
wound up instead of pursuing the other remedy. 

274. Directions for filing statement of affairs.—(1) Where a petition for winding up is filed before 
the Tribunal by any person other than the company, the Tribunal shall, if satisfied that a prima facie case 
for winding up of the company is made out, by an order direct the company to file its objections along with 
a  statement  of  its  affairs  within  thirty  days  of  the  order  in  such  form  and  in  such  manner  as  may  be 
prescribed: 

Provided that the Tribunal may allow a further period of thirty days in a situation of contingency or 

special circumstances: 

Provided further that the Tribunal may direct the petitioner to deposit such security for costs as it may 

consider reasonable as a precondition to issue directions to the company. 

(2) A company, which fails to file the statement of affairs as referred to in sub-section (1), shall forfeit 
the right to oppose the petition and such directors and officers of the company as found responsible for such 
non-compliance, shall be liable for punishment under sub-section (4). 

(3) The directors and other officers of the company, in respect of which an order for winding up is 
passed by the Tribunal under clause (d) of sub-section (1) of section 273, shall, within a period of thirty 
days of such order, submit, at the cost of the company, the books of account of the company completed and 
audited up to the date of the order, to such liquidator and in the manner specified by the Tribunal. 

(4) If any director or officer of the company contravenes the provisions of this section, the director or 
the officer of the company who is in default 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. 

(5)  The  complaint  may  be  filed  in  this  behalf  before  the  Special  Court  by  Registrar,  provisional 

liquidator, Company Liquidator or any person authorised by the Tribunal. 

275.  Company  Liquidators  and  their  appointments.—(1)  For  the  purposes  of  winding  up  of  a 
company by the Tribunal, the Tribunal at the time of the passing of the order of winding up, shall appoint 
an  Official  Liquidator  or a  liquidator  from  the  panel maintained  under  sub-section  (2)  as the  Company 
Liquidator. 

1[(2) The provisional liquidator or the Company Liquidator, as the case may, shall be appointed by the 
Tribunal from amongst the insolvency professionals registered under the Insolvency and Bankruptcy Code, 
2016 (31 of 2016);] 

(3) Where a provisional liquidator is appointed by the Tribunal, the Tribunal may limit and restrict his 
powers by the order appointing him or it or by a subsequent order, but otherwise he shall have the same 
powers as a liquidator. 

2* 

* 

* 

* 

* 

1. Subs. by Act 31 of 2016, s. 255 and the Eleventh Schedule, for sub-section (2) (w.e.f. 15-11-2016). 
2. Sub-section (4) omitted by s. 255 and the Eleventh Schedule, ibid. (w.e.f. 15-11-2016). 

171 

 
 
 
 
 
 
 
 
 
                                                           
(5) The terms and conditions of appointment of a provisional liquidator or Company Liquidator and the 
fee payable to him or it shall be specified by the Tribunal on the basis of task required to be performed, 
experience, qualification of such liquidator and size of the company. 

(6)  On  appointment  as  provisional  liquidator  or  Company  Liquidator,  as  the  case  may  be,  such 
liquidator shall file a declaration within seven days from the date of appointment in the prescribed form 
disclosing conflict of interest or lack of independence in respect of his appointment, if any, with the Tribunal 
and such obligation shall continue throughout the term of his appointment. 

(7)  While  passing  a  winding  up  order,  the  Tribunal  may  appoint  a  provisional  liquidator,  if  any, 
appointed under clause (c) of sub-section (1) of section 273, as the Company Liquidator for the conduct of 
the proceedings for the winding up of the company. 

276. Removal and replacement of liquidator.—(1) The Tribunal may, on a reasonable cause being 
shown  and  for  reasons  to  be  recorded  in  writing,  remove  the  provisional  liquidator  or  the  Company 
Liquidator, as the case may be, as liquidator of the company on any of the following grounds, namely:— 

(a) misconduct; 

(b) fraud or misfeasance; 

(c) professional incompetence or failure to exercise due care and diligence in performance of the 

powers and functions; 

(d) inability to act as provisional liquidator or as the case may be, Company Liquidator; 

(e) conflict of interest or lack of independence during the term of his appointment that would justify 

removal. 

(2) In the event of death, resignation or removal of the provisional liquidator or as the case may be, 
Company  Liquidator,  the  Tribunal  may  transfer  the  work  assigned  to  him  or  it  to  another  Company 
Liquidator for reasons to be recorded in writing. 

(3) Where the Tribunal is of the opinion that any liquidator is responsible for causing any loss or damage 
to the company due to fraud or misfeasance or failure to exercise due care and diligence in the performance 
of his or its powers and functions, the Tribunal may recover or cause to be recovered such loss or damage 
from the liquidator and pass such other orders as it may think fit. 

(4) The Tribunal shall, before passing any order under this section, provide a reasonable opportunity of 

being heard to the provisional liquidator or, as the case may be, Company Liquidator. 

277.  Intimation  to  Company  Liquidator,  provisional  liquidator  and  Registrar.—(1)  Where  the 
Tribunal makes an order for appointment of provisional liquidator or for the winding up of a company, it 
shall, within a period not exceeding seven days from the date of passing of the order, cause intimation 
thereof to be sent to the Company Liquidator or provisional liquidator, as the case may be, and the Registrar. 

(2) On receipt of the copy of order of appointment of provisional liquidator or winding up order, the 
Registrar shall make an endorsement to that effect in his records relating to the company and notify in the 
Official Gazette that such an order has been made and in the case of a listed company, the Registrar shall 
intimate about such appointment or order, as the case may be, to the stock exchange or exchanges where 
the securities of the company are listed. 

(3) The winding up order shall be deemed to be a notice of discharge to the officers, employees and 

workmen of the company, except when the business of the company is continued. 

(4) Within three weeks from the date of passing of winding up order, the Company Liquidator shall 
make an application to the Tribunal for constitution of a winding up committee to assist and monitor the 
progress of liquidation proceedings by the Company Liquidator in carrying out the function as provided in 
sub-section (5) and such winding up committee shall comprise of the following persons, namely:— 

(i) Official Liquidator attached to the Tribunal; 

(ii) nominee of secured creditors; and 

172 

 
(iii) a professional nominated by the Tribunal. 

(5) The Company Liquidator shall be the convener of the meetings of the winding up committee which 
shall assist and monitor the liquidation proceedings in following areas of liquidation functions, namely:— 

(i) taking over assets; 

(ii) examination of the statement of affairs; 

(iii)  recovery  of  property,  cash  or  any  other  assets  of  the  company  including  benefits  derived 

therefrom; 

(iv) review of audit reports and accounts of the company; 

(v) sale of assets; 

(vi) finalisation of list of creditors and contributories; 

(vii) compromise, abandonment and settlement of claims; 

(viii) payment of dividends, if any; and 

(ix) any other function, as the Tribunal may direct from time to time. 

(6) The Company Liquidator shall place before the Tribunal a report along with minutes of the meetings 
of the committee on monthly basis duly signed by the members present in the meeting for consideration till 
the final report for dissolution of the company is submitted before the Tribunal. 

(7) The Company Liquidator shall prepare the draft final report for consideration and approval of the 

winding up committee. 

(8) The  final  report  so approved  by  the  winding  up  committee  shall  be submitted  by  the  Company 

Liquidator before the Tribunal for passing of a dissolution order in respect of the company. 

278. Effect of winding up order.—The order for the winding up of a company shall operate in favour 
of all the creditors and all contributories of the company as if it had been made out on the joint petition of 
creditors and contributories. 

279. Stay of suits, etc., on winding up order.—(1) When a winding up order has been passed or a 
provisional  liquidator  has  been  appointed,  no  suit  or  other  legal  proceeding  shall  be  commenced,  or  if 
pending at the date of the winding up order, shall be proceeded with, by or against the company, except 
with the leave of the Tribunal and subject to such terms as the Tribunal may impose: 

Provided that any application to the Tribunal seeking leave under this section shall be disposed of by 

the Tribunal within sixty days. 

(2) Nothing in sub-section (1) shall apply to any proceeding pending in appeal before the Supreme 

Court or a High Court. 

1[280. Jurisdiction of Tribunal.—The Tribunal shall, notwithstanding anything contained in any other 

law for the time being in force, have jurisdiction to entertain, or dispose of,— 

(a) any suit or proceeding by or against the company; 

(b) any claim made by or against the company, including claims by or against any of its branches 

in India; 

(c) any application made under section 233; 

(d) any question of priorities or any other question whatsoever, whether of law or facts, including 
those  relating  to  assets,  business,  actions,  rights,  entitlements,  privileges,  benefits,  duties, 
responsibilities, obligations or in any matter arising out of, or in relation to winding up of the company, 

whether such suit or proceeding has been instituted, or is instituted, or such claim or question has arisen or 
arises or such application has been made or is made or such scheme has been submitted, or is submitted, 
before or after the order for the winding up of the company is made.] 

1. Subs. by Act 31 of 2016, s. 255 and the Eleventh Schedule, for section 280 (w.e.f. 15-11-2016). 

173 

 
                                                           
281. Submission of report by Company Liquidator.—(1) Where the Tribunal has made a winding 
up order or appointed a Company Liquidator, such liquidator shall, within sixty days from the order, submit 
to the Tribunal, a report containing the following particulars, namely:— 

(a) the nature and details of the assets of the company including their location and value, stating 
separately the cash balance in hand and in the bank, if any, and the negotiable securities, if any, held 
by the company: 

Provided that the valuation of the assets shall be obtained from registered valuers for this purpose; 

(b) amount of capital issued, subscribed and paid-up; 

(c)  the  existing  and  contingent  liabilities  of  the  company  including  names,  addresses  and 
occupations of its creditors, stating separately the amount of secured and unsecured debts, and in the 
case of secured debts, particulars of the securities given, whether by the company or an officer thereof, 
their value and the dates on which they were given; 

(d) the debts due to the company and the names, addresses and occupations of the persons from 

whom they are due and the amount likely to be realised on account thereof; 

(e) guarantees, if any, extended by the company; 

(f) list of contributories and dues, if any, payable by them and details of any unpaid call; 

(g) details of trade marks and intellectual properties, if any, owned by the company; 

(h) details of subsisting contracts, joint ventures and collaborations, if any; 

(i) details of holding and subsidiary companies, if any; 

(j) details of legal cases filed by or against the company; and 

(k) any other information which the Tribunal may direct or the Company Liquidator may consider 

necessary to include. 

(2) The Company Liquidator shall include in his report the manner in which the company was promoted 
or formed and whether in his opinion any fraud has been committed by any person in its promotion or 
formation or by any officer of the company in relation to the company since the formation thereof and any 
other matters which, in his opinion, it is desirable to bring to the notice of the Tribunal. 

(3) The Company Liquidator shall also make a report on the viability of the business of the company 

or the steps which, in his opinion, are necessary for maximising the value of the assets of the company. 

(4) The Company Liquidator may also, if he thinks fit, make any further report or reports. 

(5) Any person describing himself in writing to be a creditor or a contributory of the company shall be 
entitled by himself or by his agent at all reasonable times to inspect the report submitted in accordance with 
this section and take copies thereof or extracts therefrom on payment of the prescribed fees. 

282.  Directions  of  Tribunal  on  report  of  Company  Liquidator.—(1)  The  Tribunal  shall,  on 
consideration of the report of the Company Liquidator, fix a time limit within which the entire proceedings 
shall be completed and the company be dissolved: 

Provided that the Tribunal may, if it is of the opinion, at any stage of the proceedings, or on examination 
of  the  reports  submitted  to  it  by  the  Company  Liquidator  and  after  hearing  the  Company  Liquidator, 
creditors or contributories or any other interested person, that it will not be advantageous or economical to 
continue the proceedings, revise the time limit within which the entire proceedings shall be completed and 
the company be dissolved. 

(2) The Tribunal may, on examination of the reports submitted to it by the Company Liquidator and 
after hearing the Company Liquidator, creditors or contributories or any other interested person, order sale 
of the company as a going concern or its assets or part thereof: 

Provided  that  the  Tribunal  may,  where  it  considers  fit,  appoint  a  sale  committee  comprising  such 
creditors,  promoters  and  officers  of  the  company  as  the  Tribunal  may  decide  to  assist  the  Company 
Liquidator in sale under this sub-section. 

174 

 
(3) Where a report is received from the Company Liquidator or the Central Government or any person 
that a fraud has been committed in respect of the company, the Tribunal shall, without prejudice to the 
process of winding up, order for investigation under section 210, and on consideration of the report of such 
investigation  it  may  pass  order  and  give  directions  under  sections  339  to  342  or  direct  the  Company 
Liquidator to file a criminal complaint against persons who were involved in the commission of fraud. 

(4)  The  Tribunal  may  order  for  taking  such  steps  and  measures,  as  may  be  necessary,  to  protect, 

preserve or enhance the value of the assets of the company. 

(5) The Tribunal may pass such other order or give such other directions as it considers fit. 

283. Custody of company’s properties.—(1) Where a winding up order has been made or where a 
provisional liquidator has been appointed, the Company Liquidator or the provisional liquidator, as the case 
may be, shall, on the order of the Tribunal, forthwith take into his or its custody or control all the property, 
effects and actionable claims to which the company is or appears to be entitled to and take such steps and 
measures, as may be necessary, to protect and preserve the properties of the company. 

(2) Notwithstanding anything contained in sub-section (1), all the property and effects of the company 
shall be deemed to be in the custody of the Tribunal from the date of the order for the winding up of the 
company. 

(3) On an application by the Company Liquidator or otherwise, the Tribunal may, at any time after the 
making of a winding up order, require any contributory for the time being on the list of contributories, and 
any trustee, receiver, banker, agent, officer or other employee of the company, to pay, deliver, surrender or 
transfer forthwith,  or  within  such  time  as the Tribunal  directs, to the  Company  Liquidator,  any  money, 
property or books and papers in his custody or under his control to which the company is or appears to be 
entitled. 

284.  Promoters,  directors,  etc.,  to  cooperate  with  Company  Liquidator.—(1)  The  promoters, 
directors,  officers  and  employees,  who  are  or  have  been  in  employment  of  the  company  or  acting  or 
associated with the company shall extend full cooperation to the Company Liquidator in discharge of his 
functions and duties. 

1[(2) If any person required to assist or cooperate with the Company Liquidator under sub-section (1) 
does not assist or cooperate, the Company Liquidator may make an application to the Tribunal for necessary 
directions. 

(3) On receiving an application under sub-section (2), the Tribunal shall, by an order, direct the person 
required to assist or cooperate with the Company Liquidator to comply with the instructions of the Company 
Liquidator and to cooperate with him in discharging his functions and duties.] 

285. Settlement of list of contributories and application of assets.—(1) As soon as may be after the 
passing  of  a  winding  up  order  by  the  Tribunal,  the  Tribunal  shall  settle  a  list  of  contributories,  cause 
rectification of register of members in all cases where rectification is required in pursuance of this Act and 
shall cause the assets of the company to be applied for the discharge of its liability: 

Provided that where it appears to the Tribunal that it would not be necessary to make calls on or adjust 

the rights of contributories, the Tribunal may dispense with the settlement of a list of contributories. 

(2)  In  settling  the  list  of  contributories,  the  Tribunal  shall  distinguish  between  those  who  are 
contributories in their own right and those who are contributories as being representatives of, or liable for 
the debts of, others. 

(3) While settling the list of contributories, the Tribunal shall include every person, who is or has been 
a member, who shall be liable to contribute to the assets of the company an amount sufficient for payment 
of the debts and liabilities and the costs, charges and expenses of winding up, and for the adjustment of the 
rights of the contributories among themselves, subject to the following conditions, namely:— 

(a) a person who has been a member shall not be liable to contribute if he has ceased to be a member 

for the preceding one year or more before the commencement of the winding up; 

1. Subs. by Act 29 of 2020, s. 46, for sub-section (2) (w.e.f. 21-12-2020).  

175 

 
                                                           
(b)  a person  who  has  been  a  member  shall  not  be liable  to  contribute  in  respect  of  any  debt  or 

liability of the company contracted after he ceased to be a member; 

(c) no person who has been a member shall be liable to contribute unless it appears to the Tribunal 
that  the  present  members  are  unable  to  satisfy  the  contributions  required  to  be  made  by  them  in 
pursuance of this Act; 

(d) in the case of a company limited by shares, no contribution shall be required from any person, 
who is or has been a member exceeding the amount, if any, unpaid on the shares in respect of which he 
is liable as such member; 

(e)  in  the  case  of  a  company  limited  by  guarantee,  no  contribution  shall  be  required  from  any 
person, who is or has been a member exceeding the amount undertaken to be contributed by him to the 
assets of the company in the event of its being wound up but if the company has a share capital, such 
member shall be liable to contribute to the extent of any sum unpaid on any shares held by him as if the 
company were a company limited by shares. 

286. Obligations of directors and managers.—In the case of a limited company, any person who is 
or has been a director or manager, whose liability is unlimited under the provisions of this Act, shall, in 
addition to his liability, if any, to contribute as an ordinary member, be liable to make a further contribution 
as if he were at the commencement of winding up, a member of an unlimited company: 

Provided that — 

(a)  a  person  who  has  been  a  director  or  manager  shall  not  be  liable  to  make  such  further 
contribution, if he has ceased to hold office for a year or upwards before the commencement of the 
winding up; 

(b) a person who has been a director or manager shall not be liable to make such further contribution 

in respect of any debt or liability of the company contracted after he ceased to hold office; 

(c) subject to the articles of the company, a director or manager shall not be liable to make such 
further contribution unless the Tribunal deems it necessary to require the contribution in order to satisfy 
the debts and liabilities of the company, and the costs, charges and expenses of the winding up. 

287. Advisory committee.—(1) The Tribunal may, while passing an order of winding up of a company, 
direct that there shall be, an advisory committee to advise the Company Liquidator and to report to the 
Tribunal on such matters as the Tribunal may direct. 

(2) The advisory committee appointed by the Tribunal shall consist of not more than twelve members, 
being creditors and contributories of the company or such other persons in such proportion as the Tribunal 
may, keeping in view the circumstances of the company under liquidation, direct. 

(3) The Company Liquidator shall convene a meeting of creditors and contributories, as ascertained 
from the books and documents, of the company within thirty days from the date of order of winding up for 
enabling the Tribunal to determine the persons who may be members of the advisory committee. 

(4) The advisory committee shall have the right to inspect the books of account and other documents, 

assets and properties of the company under liquidation at a reasonable time. 

(5) The provisions relating to the convening of the meetings, the procedure to be followed thereat and 
other matters relating to conduct of business by the advisory committee shall be such as may be prescribed. 

(6) The meeting of advisory committee shall be chaired by the Company Liquidator. 

288.  Submission  of  periodical  reports  to  Tribunal.—(1)  The  Company  Liquidator  shall  make 
periodical reports to the Tribunal and in any case make a report at the end of each quarter with respect to 
the progress of the winding up of the company in such form and manner as may be prescribed. 

(2) The Tribunal may, on an application by the Company Liquidator, review the orders made by it and 

make such modifications as it thinks fit. 

289.  [Power  of  Tribunal  on  application  for  stay  of  winding  up.]  Omitted  by  the  Insolvency  and 

Bankruptcy Code, 2016 (31 of 2016), s. 255 and the Eleventh Schedule (w.e.f. 15-11-2016). 

176 

 
290. Powers and duties of Company Liquidator.—(1) Subject to directions by the Tribunal, if any, 
in  this  regard,  the  Company  Liquidator,  in  a  winding  up  of  a  company  by  the  Tribunal,  shall  have  the 
power— 

(a) to carry on the business of the company so far as may be necessary for the beneficial winding 

up of the company; 

(b) to do all acts and to execute, in the name and on behalf of the company, all deeds, receipts and 

other documents, and for that purpose, to use, when necessary, the company’s seal; 

(c) to sell the immovable and movable property and actionable claims of the company by public 
auction or private contract, with power to transfer such property to any person or body corporate, or to 
sell the same in parcels; 

(d) to sell the whole of the undertaking of the company as a going concern; 

(e) to raise any money required on the security of the assets of the company; 

(f) to institute or defend any suit, prosecution or other legal proceeding, civil or criminal, in the 

name and on behalf of the company; 

(g)  to  invite  and  settle  claim  of  creditors,  employees  or  any  other  claimant  and  distribute  sale 

proceeds in accordance with priorities established under this Act; 

(h)  to  inspect the  records and  returns  of  the  company  on the  files  of the  Registrar  or any  other 

authority; 

(i) to prove rank and claim in the insolvency of any contributory for any balance against his estate, 
and to receive dividends in the insolvency, in respect of that balance, as a separate debt due from the 
insolvent, and rate ably with the other separate creditors; 

(j)  to  draw,  accept,  make  and  endorse  any  negotiable  instruments  including  cheque,  bill  of 
exchange, hundi or promissory note in the name and on behalf of the company, with the same effect 
with respect to the liability of the company as if such instruments had been drawn, accepted, made or 
endorsed by or on behalf of the company in the course of its business; 

(k) to take out, in his official name, letters of administration to any deceased contributory, and to 
do  in  his  official  name  any  other  act  necessary  for  obtaining  payment  of  any  money  due  from  a 
contributory or his estate which cannot be conveniently done in the name of the company, and in all 
such cases, the money due shall, for the purpose of enabling the Company Liquidator to take out the 
letters of administration or recover the money, be deemed to be due to the Company Liquidator himself; 

(l) to obtain any professional assistance from any person or appoint any professional, in discharge 
of his duties, obligations and responsibilities and for protection of the assets of the company, appoint 
an agent to do any business which the Company Liquidator is unable to do himself; 

(m)  to  take  all  such  actions,  steps,  or  to  sign,  execute  and  verify  any  paper,  deed,  document, 

application, petition, affidavit, bond or instrument as may be necessary,— 

(i) for winding up of the company; 

(ii) for distribution of assets; 

(iii) in discharge of his duties and obligations and functions as Company Liquidator; and 

(n) to apply to the Tribunal for such orders or directions as may be necessary for the winding up of 

the company. 

(2) The exercise of powers by the Company Liquidator under sub-section (1) shall be subject to the 

overall control of the Tribunal. 

(3) Notwithstanding the provisions of sub-section (1), the Company Liquidator shall perform such other 

duties as the Tribunal may specify in this behalf. 

291. Provision for professional assistance to Company Liquidator.—(1) The Company Liquidator 
may, with the sanction of the Tribunal, appoint one or more chartered accountants or company secretaries 

177 

 
or cost accountants or legal practitioners or such other professionals on such terms and conditions, as may 
be necessary, to assist him in the performance of his duties and functions under this Act. 

(2) Any person appointed under this section shall disclose forthwith to the Tribunal in the prescribed 

form any conflict of interest or lack of independence in respect of his appointment. 

292. Exercise and control of Company Liquidator’s powers.—(1) Subject to the provisions of this 
Act, the Company Liquidator shall, in the administration of the assets of the company and the distribution 
thereof  among  its  creditors,  have  regard to any  directions  which  may  be  given  by  the  resolution  of the 
creditors or contributories at any general meeting or by the advisory committee. 

(2)  Any  directions  given  by  the  creditors  or  contributories  at  any  general  meeting  shall,  in  case  of 

conflict, be deemed to override any directions given by the advisory committee. 

(3) The Company Liquidator— 

(a) may summon meetings of the creditors or contributories, whenever he thinks fit, for the purpose 

of ascertaining their wishes; and 

(b) shall summon such meetings at such times, as the creditors or contributories, as the case may 
be, may, by resolution, direct, or whenever requested in writing to do so by not less than one-tenth in 
value of the creditors or contributories, as the case may be. 

(4) Any person aggrieved by any act or decision of the Company Liquidator may apply to the Tribunal, 
and the Tribunal may confirm, reverse or modify the act or decision complained of and make such further 
order as it thinks just and proper in the circumstances. 

293. Books to be kept by Company Liquidator.—(1) The Company Liquidator shall keep proper 
books  in  such  manner,  as may  be  prescribed,  in  which  he  shall cause entries  or  minutes to  be  made  of 
proceedings at meetings and of such other matters as may be prescribed. 

(2) Any creditor or contributory may, subject to the control of the Tribunal, inspect any such books, 

personally or through his agent. 

294. Audit of Company Liquidator’s accounts.—(1) The Company Liquidator shall maintain proper 
and regular books of account including accounts of receipts and payments made by him in such form and 
manner as may be prescribed. 

(2) The Company Liquidator shall, at such times as may be prescribed but not less than twice in each 
year during his tenure of office, present to the Tribunal an account of the receipts and payments as such 
liquidator in the prescribed form in duplicate, which shall be verified by a declaration in such form and 
manner as may be prescribed. 

(3) The Tribunal  shall  cause  the  accounts  to  be  audited  in such  manner as  it thinks  fit, and  for the 
purpose  of  the  audit,  the  Company  Liquidator  shall  furnish  to  the  Tribunal  with  such  vouchers  and 
information as the Tribunal may require, and the Tribunal may, at any time, require the production of, and 
inspect, any books of account kept by the Company Liquidator. 

(4)  When  the  accounts  of  the  company  have  been  audited,  one  copy  thereof  shall  be  filed  by  the 
Company Liquidator with the Tribunal, and the other copy shall be delivered to the Registrar which shall 
be open to inspection by any creditor, contributory or person interested. 

(5) Where an account referred to in sub-section (4) relates to a Government company, the Company 

Liquidator shall forward a copy thereof— 

(a) to the Central Government, if that Government is a member of the Government company; or 

(b) to any State Government, if that Government is a member of the Government company; or 

(c) to the Central Government and any State Government, if both the Governments are members 

of the Government company. 

178 

 
(6) The Company Liquidator shall cause the accounts when audited, or a summary thereof, to be printed, 
and  shall  send  a  printed  copy  of  the  accounts  or  summary  thereof  by  post  to  every  creditor  and  every 
contributory: 

Provided that the Tribunal may dispense with the compliance of the provisions of this sub-section in 

any case it deems fit. 

295. Payment of debts by contributory and extent of set-off.—(1) The Tribunal may, at any time 
after passing of a winding up order, pass an order requiring any contributory for the time being on the list 
of contributories to pay, in the manner directed by the order, any money due to the company, from him or 
from the estate of the person whom he represents, exclusive of any money payable by him or the estate by 
virtue of any call in pursuance of this Act. 

(2) The Tribunal, in making an order, under sub-section (1), may,— 

(a) in the case of an unlimited company, allow to the contributory, by way of set-off, any money 
due  to  him  or  to  the estate  which  he represents,  from  the  company,  on  any  independent  dealing  or 
contract with the company, but not any money due to him as a member of the company in respect of 
any dividend or profit; and 

(b) in the case of a limited company, allow to any director or manager whose liability is unlimited, 

or to his estate, such set-off. 

(3) In the case of any company, whether limited or unlimited, when all the creditors have been paid in 
full, any money due on any account whatever to a contributory from the company may be allowed to him 
by way of set-off against any subsequent call. 

296. Power of Tribunal to make calls.—The Tribunal may, at any time after the passing of a winding 

up order, and either before or after it has ascertained the sufficiency of the assets of the company,— 

(a) make calls on all or any of the contributories for the time being on the list of the contributories, 
to the extent of their liability, for payment of any money which the Tribunal considers necessary to 
satisfy the debts and liabilities of the company, and the costs, charges and expenses of winding up, and 
for the adjustment of the rights of the contributories among themselves; and 

(b) make an order for payment of any calls so made. 

297.  Adjustment  of  rights  of  contributories.—The  Tribunal  shall  adjust  the  rights  of  the 

contributories among themselves and distribute any surplus among the persons entitled thereto. 

298.  Power  to  order  costs.—The  Tribunal  may,  in  the  event  of  the  assets  of  a  company  being 
insufficient to satisfy its liabilities, make an order for the payment out of the assets, of the costs, charges 
and expenses incurred in the winding up, in such order of priority inter se as the Tribunal thinks just and 
proper. 

299. Power to summon persons suspected of having property of company, etc.—(1) The Tribunal 
may, at any time after the appointment of a provisional liquidator or the passing of a winding up order, 
summon before it any officer of the company or person known or suspected to have in his possession any 
property or books or papers, of the company, or known or suspected to be indebted to the company, or any 
person whom the Tribunal thinks to be capable of giving information concerning the promotion, formation, 
trade, dealings, property, books or papers, or affairs of the company. 

(2) The Tribunal  may  examine  any  officer  or  person  so  summoned  on  oath  concerning  the  matters 
aforesaid, either by word of mouth or on written interrogatories or on affidavit and may, in the first case, 
reduce his answers to writing and require him to sign them. 

(3) The Tribunal may require any officer or person so summoned to produce any books and papers 
relating to the company in his custody or power, but, where he claims any lien on books or papers produced 
by  him,  the  production  shall  be  without  prejudice  to  such  lien,  and  the  Tribunal  shall  have  power  to 
determine all questions relating to that lien. 

179 

 
(4) The Tribunal may direct the liquidator to file before it a report in respect of debt or property of the 

company in possession of other persons. 

(5) If the Tribunal finds that— 

(a)  a  person  is  indebted  to  the  company,  the  Tribunal  may  order  him  to  pay  to  the  provisional 
liquidator or, as the case may be, the liquidator at such time and in such manner as the Tribunal may 
consider just, the amount in which he is indebted, or any part thereof, either in full discharge of the 
whole amount or not, as the Tribunal thinks fit, with or without costs of the examination; 

(b) a person is in possession of any property belonging to the company, the Tribunal may order him 
to deliver to the provisional liquidator or, as the case may be, the liquidator, that property or any part 
thereof, at such time, in such manner and on such terms as the Tribunal may consider just. 

(6)  If  any  officer  or  person  so  summoned  fails  to  appear  before  the Tribunal  at  the  time  appointed 

without a reasonable cause, the Tribunal may impose an appropriate cost. 

(7) Every order made under sub-section (5) shall be executed in the same manner as decrees for the 

payment of money or for the delivery of property under the Code of Civil Procedure, 1908 (5 of 1908). 

(8) Any person making any payment or delivery in pursuance of an order made under sub-section (5) 
shall by such payment or delivery be, unless otherwise directed by such order, discharged from all liability 
whatsoever in respect of such debt or property. 

300. Power to order examination of promoters, directors, etc.—(1) Where an order has been made 
for the winding up of a company by the Tribunal, and the Company Liquidator has made a report to the 
Tribunal  under  this  Act,  stating  that  in  his  opinion  a  fraud  has  been  committed  by  any  person  in  the 
promotion, formation, business or conduct of affairs of the company since its formation, the Tribunal may, 
after considering the report, direct that such person or officer shall attend before the Tribunal on a day 
appointed by it for that purpose, and be examined as to the promotion or formation or the conduct of the 
business of the company or as to his conduct and dealings as an officer thereof. 

(2) The Company Liquidator shall take part in the examination, and for that purpose he or it may, if 
specially authorised by the Tribunal in that behalf, employ such legal assistance as may be sanctioned by 
the Tribunal. 

(3) The person shall be examined on oath and shall answer all such questions as the Tribunal may put, 

or allow to be put, to him. 
(4) A person ordered to be examined under this section— 

(a) shall, before his  examination,  be  furnished  at  his own  cost  with  a copy  of the  report  of  the 

Company Liquidator; and 

(b) may at his own cost employ chartered accountants or company secretaries or cost accountants 
or legal practitioners entitled to appear before the Tribunal under section 432, who shall be at liberty to 
put to him such questions as the Tribunal may consider just for the purpose of enabling him to explain 
or qualify any answers given by him. 

(5) If any such person applies to the Tribunal to be exculpated from any charges made or suggested 
against him, it shall be the duty of the Company Liquidator to appear on the hearing of such application 
and call the attention of the Tribunal to any matters which appear to the Company Liquidator to be relevant. 

(6) If the Tribunal, after considering any evidence given or hearing witnesses called by the Company 
Liquidator,  allows  the  application  made  under  sub-section  (5),  the  Tribunal  may  order  payment  to  the 
applicant of such costs as it may think fit. 

(7) Notes of the examination shall be taken down in writing, and shall be read over to or by, and signed 
by, the person examined, a copy be supplied to him and may thereafter be used in evidence against him, 
and shall be open to inspection by any creditor or contributory at all reasonable times. 

(8) The Tribunal may, if it thinks fit, adjourn the examination from time to time. 

180 

 
(9)  An  examination  under  this  section  may,  if  the  Tribunal  so  directs,  be  held  before  any  person  or 

authority authorised by the Tribunal. 

(10) The powers of the Tribunal under this section as to the conduct of the examination, but not as to 
costs, may be exercised by the person or authority before whom the examination is held in pursuance of 
sub-section (9). 

301.  Arrest  of  person  trying  to  leave  India  or  abscond.—At  any  time  either  before  or  after 
passing a winding up order, if the Tribunal is satisfied that a contributory or a person having property, 
accounts or papers of the company in his possession is about to leave India or otherwise to abscond, or 
is about to remove or conceal any of his property, for the purpose of evading payment of calls or of 
avoiding examination respecting the affairs of the company, the Tribunal may cause— 

(a) the contributory to be detained until such time as the Tribunal may order; and 

(b) his books and papers and movable property to be seized and safely kept until such time as 

the Tribunal may order. 

302. Dissolution of company by Tribunal.—(1) When the affairs of a company have been completely 
wound  up,  the  Company  Liquidator  shall  make  an  application  to  the  Tribunal  for  dissolution  of  such 
company. 

(2) The Tribunal shall on an application filed by the Company Liquidator under sub-section (1) or when 
the Tribunal is of the opinion that it is just and reasonable in the circumstances of the case that an order for 
the dissolution of the company should be made, make an order that the company be dissolved from the date 
of the order, and the company shall be dissolved accordingly. 

1[(3) The Tribunal shall, within a period of thirty days form the date of the order, — 

(a)  forward  a  copy  of the order  to the  Registrar  who  shall  record in  the  register  relating  to  the 

company a minute of the dissolution of the company; and 

(b) direct the Company Liquidator to forward a copy of  the order to the Registrar who shall record 

in the register relating to the company a minute of the dissolution of the company.] 

2* 

* 

* 

* 

* 

303. Appeals from orders made before commencement of Act.—Nothing in this Chapter shall affect 
the operation or enforcement of any order made by any Court in any proceedings for the winding up of a 
company immediately before the commencement of this Act and an appeal against such order shall be filed 
before such authority competent to hear such appeals before such commencement. 

[Part II.—Voluntary winding up] Omitted by the Insolvency and Bankruptcy Code, 2016 (31 of 2016), 

s. 255 and the Eleventh Schedule (w.e.f. 15-11-2016). 

304.[Circumstances  in  which  company  may  be  wound  up  voluntarily.]  Omitted  by  s.  255  and  the 

Eleventh Schedule, ibid.(w.e.f. 15-11-2016). 

305.[Declaration of solvency in case of proposal to wind up voluntarily.] Omitted by s. 255 and the 

Eleventh Schedule, ibid.(w.e.f. 15-11-2016). 

306.[Meeting of creditors.]Omitted by s. 255 and the Eleventh Schedule, ibid. (w.e.f. 15-11-2016). 

307.[Publication of resolution to wind up voluntarily.] Omitted by s. 255and the Eleventh Schedule, 

ibid.(w.e.f. 15-11-2016). 

308.[Commencement  of  voluntary  winding  up.]  Omitted  by  s.  255  and  the  Eleventh  Schedule,  ibid. 

(w.e.f. 15-11-2016). 

309.[Effect  of  voluntary  winding  up.]  Omitted  by  s.  255  and  the  Eleventh  Schedule,  ibid.                                

(w.e.f. 15-11-2016). 

1. Subs. by Act 29 of 2020, s. 47, for sub-section (3) (w.e.f. 21-212020). 
2. Sub-section (4) omitted by s. 47, ibid. (w.e.f. 21-12-2020). 

181 

 
 
 
 
 
 
 
 
 
 
                                                           
310.[Appointment  of  Company  Liquidator.]  Omitted  by  s.  255  and  the  Eleventh  Schedule,  ibid.           

(w.e.f. 15-11-2016). 

311.[Power to remove and fill vacancy of Company Liquidator.] Omitted by s. 255 and the Eleventh 

Schedule, ibid.(w.e.f. 15-11-2016). 

312.[Notice of appointment of Company Liquidator to be given to Registrar.]Omitted by s. 255 and the 

Eleventh Schedule, ibid.(w.e.f. 15-11-2016). 

313.[Cesser  of  Board’s  powers  on  appointment  of  Company  Liquidator.]Omitted  by  s.  255  and  the 

Eleventh Schedule, ibid.(w.e.f. 15-11-2016). 

314.[Powers and duties of Company Liquidator in voluntary winding up.]Omitted by s. 255 and the 

Eleventh Schedule, ibid.(w.e.f. 15-11-2016). 

315.[Appointment  of  committees.]Omitted  by  s.  255  and  the  Eleventh  Schedule,  ibid.(w.e.f.  15-11-

2016). 

316.[Company Liquidator to submit report on progress of winding up.] Omitted by the Insolvency and 

Bankruptcy Code, 2016 (31 of 2016), s. 255 and the Eleventh Schedule  (w.e.f. 15-11-2016). 

317.[Report of Company Liquidator to Tribunal for examination of persons.] Omitted by s. 255 and the 

Eleventh Schedule, ibid.(w.e.f. 15-11-2016). 

318.[Final  meeting  and  dissolution  of  company.]  Omitted  by  s.  255  and  the  Eleventh  Schedule, 

ibid.(w.e.f. 15-11-2016). 

319.[Power  of  Company  Liquidator  to  accept  shares,  etc.,  as  consideration  for  sale  of  property  of 

company.] Omitted by s. 255 and the Eleventh Schedule, ibid.(w.e.f. 15-11-2016). 

320.  [Distribution  of  property  of  company.]  Omitted  by  s.  255  and  the  Eleventh  Schedule,  ibid.            

(w.e.f. 15-11-2016). 

321.  [Arrangement  when  binding  on  company  and  creditors.]  Omitted  by  the  Insolvency  and 

Bankruptcy Code, 2016 (31 of 2016), s. 255 and the Eleventh Schedule (w.e.f. 15-11-2016). 

322. [Power to apply to Tribunal to have questions determined, etc.] Omitted by s. 255 and the Eleventh 

Schedule, ibid.(w.e.f. 15-11-2016). 

323.[Costs of voluntary winding up.]Omitted by s. 255 and the Eleventh Schedule, ibid.               (w.e.f. 

15-11-2016). 

PART III.—Provisions applicable to every mode of winding up 

324. Debts of all descriptions to be admitted to proof.— In every winding up (subject, in the case of 
insolvent  companies,  to  the  application  in  accordance  with  the  provisions  of  this  Act  or  of  the  law  of 
insolvency),  all  debts  payable  on  a  contingency,  and  all  claims  against  the  company,  present  or  future, 
certain or contingent, ascertained or sounding only in damages, shall be admissible to proof against the 
company, a just estimate being made, so far as possible, of the value of such debts or claims as may be 
subject to any contingency, or may sound only in damages, or for some other reason may not bear a certain 
value. 

325.[Application of insolvency rules in winding up of insolvent companies.] Omitted by the Insolvency 

and Bankruptcy Code, 2016 (31 of 2016) s. 255 and the Eleventh Schedule   (w.e.f. 15-11-2016). 

1[326. Overriding preferential payments.—(1) In the winding up of a company under this Act, the 

following debts shall be paid in priority to all other debts:— 

(a) workmen’s dues; and 

(b) where a secured creditor has realised a secured asset, so much of the debts due to such secured 
creditor  as  could  not  be  realised  by  him  or  the  amount  of  the  workmen's  portion  in  his  security  (if 
payable under the law), whichever is less, pari passu with the workmen's dues: 

1. Subs. by Act 31 of 2016, s. 255 and the Eleventh Schedule, for section 326 (w.e.f. 15-11-2016). 

182 

 
                                                           
Provided that in case of the winding up of a company, the sums referred to in sub-clauses (i) and 
(ii) of clause (b) of the Explanation, which are payable for a period of two years preceding the winding 
up order or such other period as may be prescribed, shall be paid in priority to all other debts (including 
debts due to secured creditors), within a period of thirty days of sale of assets and shall be subject to 
such charge over the security of secured creditors as may be prescribed. 

(2) The debts payable under the proviso to sub-section (1) shall be paid in full before any payment is 
made to secured creditors and thereafter debts payable under that sub-section shall be paid in full, unless 
the assets are insufficient to meet them, in which case they shall abate in equal proportions.  

Explanation.—For the purposes of this section, and section 327— 

(a) “workmen”, in relation to a company, means the employees of the company, being workmen 

within the meaning of clause (s) of section 2 of the Industrial Disputes Act, 1947 (14 of 1947); 

(b) “workmen's dues”, in relation to a company, means the aggregate of the following sums due 

from the company to its workmen, namely:— 

(i) all wages or salary including wages payable for time or piece work and salary earned wholly 
or in part by way of commission of any workman in respect of services rendered to the company 
and  any  compensation  payable  to  any  workman  under  any  of  the  provisions  of  the  Industrial 
Disputes Act, 1947 (14 of 1947); 

(ii) all accrued holiday remuneration becoming payable to any workman or, in the case of his 
death, to any other person in his right on the termination of his employment before or by the effect 
of the winding up order or resolution; 

(iii)  unless  the  company  is  being  wound  up  voluntarily  merely  for  the  purposes  of 
reconstruction  or  amalgamation  with  another  company  or  unless  the  company  has,  at  the 
commencement of the winding up, under such a contract with insurers as is mentioned in section  
14 of the Workmen's Compensation Act, 1923 (19 of 1923), rights capable of being transferred to 
and  vested  in  the  workmen,  all  amount  due  in  respect  of  any  compensation  or  liability  for 
compensation under the said Act in respect of the death or disablement of any workman of the 
company; 

(iv) all sums due to any workman from the provident fund, the pension fund, the gratuity fund 

or any other fund for the welfare of the workmen, maintained by the company; 

(c) “workmen's portion”, in relation to the security of any secured creditor of a company, means 
the amount which bears to the value of the security the same proportion as the amount of the workmen's 
dues bears to the aggregate of the amount of workmen's dues and the amount of the debts due to the 
secured creditors.  

Illustration 

The value of the security of a secured creditor of a company is Rs. 1,00,000. The total amount of the workmen's 
dues  is  Rs.  1,00,000. The  amount  of  the  debts  due  from  the  company  to  its  secured  creditors  is  Rs.3,00,000.  The 
aggregate of the amount of workmen's dues and the amount of debts due to secured creditors is Rs. 4,00,000. The 
workmen's portion of the security is, therefore, one-fourth of the value of the security, that is Rs. 25,000.] 

327. Preferential payments.—(1) In a winding up, subject to the provisions of section 326, there shall 

be paid in priority to all other debts,— 

(a) all revenues, taxes, cesses and rates due from the company to the Central Government or a State 
Government or to a local authority at the relevant date, and having become due and payable within the 
twelve months immediately before that date; 

(b) all wages or salary including wages payable for time or piece work and salary earned wholly or 
in part by way of commission of any employee in respect of services rendered to the company and due 
for a period not exceeding four months within the twelve months immediately before the relevant date, 
subject to the condition that the amount payable under this clause to any workman shall not exceed 
such amount as may be notified; 

183 

 
(c) all accrued holiday remuneration becoming payable to any employee, or in the case of his death, 
to any other person claiming under him, on the termination of his employment before, or by the winding 
up order, or, as the case may be, the dissolution of the company; 

(d) unless the company is being wound up voluntarily merely for the purposes of reconstruction or 
amalgamation with another company, all amount due in respect of contributions payable during the 
period  of  twelve  months  immediately  before  the  relevant  date  by  the  company  as  the  employer  of 
persons under the Employees’ State Insurance Act, 1948 (34 of 1948) or any other law for the time 
being in force; 

(e) unless the company has, at the commencement of winding up, under such a contract with any 
insurer as is mentioned in section 14 of the Workmen’s Compensation Act, 1923 (8 of 1923), rights 
capable  of  being  transferred  to  and  vested  in  the  workmen,  all  amount  due  in  respect  of  any 
compensation or liability for compensation under the said Act in respect of the death or disablement of 
any employee of the company: 

Provided that where any compensation under the said Act is a weekly payment, the amount payable 
under this clause shall be taken to be the amount of the lump sum for which such weekly payment 
could, if redeemable, be redeemed, if the employer has made an application under that Act; 

(f) all sums due to any employee from the provident fund, the pension fund, the gratuity fund or 

any other fund for the welfare of the employees, maintained by the company; and 

(g) the expenses of any investigation held in pursuance of sections 213 and 216, in so far as they 

are payable by the company. 

(2) Where any payment has been made to any employee of a company on account of wages or salary 
or accrued holiday remuneration, himself or, in the case of his death, to any other person claiming through 
him, out of money advanced by some person for that purpose, the person by whom the money was advanced 
shall, in a winding up, have a right of priority in respect of the money so advanced and paid-up to the 
amount by which the sum in respect of which the employee or other person in his right would have been 
entitled to priority in the winding up has been reduced by reason of the payment having been made. 

(3) The debts enumerated in this section shall— 

(a) rank equally among themselves and be paid in full, unless the assets are insufficient to meet 

them, in which case they shall abate in equal proportions; and 

(b) so far as the assets of the company available for payment to general creditors are insufficient to 
meet them, have priority over the claims of holders of debentures under any floating charge created by 
the company, and be paid accordingly out of any property comprised in or subject to that charge. 

(4) Subject to the retention of such sums as may be necessary for the costs and expenses of the winding 
up, the debts under this section shall be discharged forthwith so far as the assets are sufficient to meet them, 
and in the case of the debts to which priority is given under clause (d) of sub-section (1), formal proof 
thereof shall not be required except in so far as may be otherwise prescribed. 

(5) In the event of a landlord or other person distaining or having distained on any goods or effects of 
the company within three months immediately before the date of a winding up order, the debts to which 
priority is given under this section shall be a first charge on the goods or effects so distrained on or the 
proceeds of the sale thereof: 

Provided that, in respect of any money paid under any such charge, the landlord or other person shall 

have the same rights of priority as the person to whom the payment is made. 

(6) Any remuneration in respect of a period of holiday or of absence from work on medical  grounds 
through sickness or other good cause shall be deemed to be wages in respect of services rendered to the 
company during that period. 

184 

 
1[(7) Sections 326 and 327 shall not be applicable in the event of liquidation under the Insolvency and 

Bankruptcy Code, 2016 (31 of 2016).] 

Explanation.—For the purposes of this section,— 

(a) the expression  “accrued  holiday  remuneration”  includes,  in  relation  to any  person,  all  sums 
which, by virtue either of his contract of employment or of any enactment including any order made or 
direction given thereunder, are payable on account of the remuneration which would, in the ordinary 
course, have become payable to him in respect of a period of holiday, had his employment with the 
company continued until he became entitled to be allowed the holiday; 

(b) the expression “employee” does not include a workman; and 

2[(c)  the  expression  “relevant  date”  means  in  the  case  of  a  company  being  wound  up  by  the 
Tribunal,  the  date  of  appointment  or  first  appointment  of  a  provisional  liquidator,  or  if  no  such 
appointment  was  made,  the  date  of  the  winding  up  order,  unless,  in  either  case,  the  company  had 
commenced to be wound up voluntarily before that date under the Insolvency and Bankruptcy Code, 
2016 (31 of 2016).] 

328. Fraudulent preference.—(1) Where a company has given preference to a person who is one of 
the creditors of the company or a surety or guarantor for any of the debts or other liabilities of the company, 
and the company does anything or suffers anything done which has the effect of putting that person into a 
position which, in the event of the company going into liquidation, will be better than the position he would 
have been in if that thing had not been done prior to six months of making winding up application, the 
Tribunal,  if  satisfied  that,  such  transaction  is  a  fraudulent  preference  may  order  as  it  may  think  fit  for 
restoring the position to what it would have been if the company had not given that preference. 

(2) If the Tribunal is satisfied that there is a preference transfer of property, movable or immovable, or 
any delivery of goods, payment, execution made, taken or done by or against a company within six months 
before making winding up application, the Tribunal may order as it may think fit and may declare such 
transaction invalid and restore the position. 

3[329. Transfers not in good faith to be void.—Any transfer of property, movable or immovable, or 
any delivery of goods, made by a company, not being a transfer or delivery made in the ordinary course of 
its business or in favour of a purchaser or encumbrancer in good faith and for valuable consideration, if 
made within a period of one year before the presentation of a petition for winding up by the Tribunal under 
this Act shall be void against the Company Liquidator.] 

330. Certain transfers to be void.—Any transfer or assignment by a company of all its properties or 

assets to trustees for the benefit of all its creditors shall be void. 

331.  Liabilities  and  rights  of  certain  persons fraudulently  preferred.—(1)  Where  a  company  is 
being wound up and anything made, taken or done after the commencement of this Act is invalid under 
section 328 as a fraudulent preference of a person interested in property mortgaged or charged to secure the 
company’s debt, then, without prejudice to any rights or liabilities arising, apart from this provision, the 
person  preferred  shall  be  subject  to  the  same  liabilities,  and  shall  have  the  same  rights,  as  if  he  had 
undertaken to be personally liable as a surety for the debt, to the extent of the mortgage or charge on the 
property or the value of his interest, whichever is less. 

(2) The value of the interest of the person preferred under sub-section (1) shall be determined as at the 
date of the transaction constituting the fraudulent preference, as if the interest were free of all encumbrances 
other than those to which the mortgage or charge for the debt of the company was then subject. 

(3) On an application made to the Tribunal with respect to any payment on the ground that the payment 
was a fraudulent preference of a surety or guarantor, the Tribunal shall have jurisdiction to determine any 
questions with respect to the payment arising between the person to whom the payment was made and the 
surety or guarantor and to grant relief in respect thereof, notwithstanding that it is not necessary so to do 

1. Ins. by Act 31 of 2016, s. 255 and the Eleventh Schedule  (w.e.f. 15-11-2016). 
2. Subs. by s. 255 and the Eleventh Schedule, ibid., for clause (c) (w.e.f. 15-11-2016). 
3. Subs. by Act 31 of 2016, s. 255 and the Eleventh Schedule, for section 329 (w.e.f. 15-11-2016). 

185 

 
                                                           
for the purposes of the winding up, and for that purpose, may give leave to bring in the surety or guarantor 
as a third party as in the case of a suit for the recovery of the sum paid. 

(4) The provisions of sub-section (3) shall apply mutatis mutandis in relation to transactions other than 

payment of money. 

332.  Effect  of  floating  charge.—Where  a  company  is  being  wound  up,  a  floating  charge  on  the 
undertaking  or  property  of  the  company  created  within  the  twelve  months  immediately  preceding  the 
commencement of the winding up, shall, unless it is proved that the company immediately after the creation 
of the charge was solvent, be invalid, except for the amount of any cash paid to the company at the time of, 
or subsequent to the creation of, and in consideration for, the charge, together with interest on that amount 
at the rate of five per cent. per annum or such other rate as may be notified by the Central Government in 
this behalf. 

333. Disclaimer of onerous property.—(1) Where any part of the property of a company which is 

being wound up consists of— 

(a) land of any tenure, burdened with onerous covenants; 

(b) shares or stocks in companies; 

(c) any other property which is not saleable or is not readily saleable by reason of the possessor 
thereof  being  bound either  to  the performance  of  any  onerous  act  or  to the  payment  of any  sum  of 
money; or 

(d) unprofitable contracts, 

the Company Liquidator may, notwithstanding that he has endeavoured to sell or has taken possession of 
the property or exercised any act of ownership in relation thereto or done anything in pursuance of the 
contract, with the leave of the Tribunal and subject to the provisions of this section, by writing signed by 
him, at any time within twelve months after the commencement of the winding up or such extended period 
as may be allowed by the Tribunal, disclaim the property: 

Provided  that  where  the  Company  Liquidator  had  not  become  aware  of  the  existence  of  any  such 
property  within  one  month  from  the  commencement  of  the  winding  up,  the  power  of  disclaiming  the 
property may be exercised at any time within twelve months after he has become aware thereof or such 
extended period as may be allowed by the Tribunal. 

(2) The disclaimer shall operate to determine, as from the date of disclaimer, the rights, interest and 
liabilities  of  the  company  in  or  in  respect  of  the  property  disclaimed,  but  shall  not,  except  so  far  as  is 
necessary for the purpose of releasing the company and the property of the company from liability, affect 
the rights, interest or liabilities of any other person. 

(3)  The  Tribunal,  before  or  on  granting  leave  to  disclaim,  may  require  such  notices  to  be  given  to 
persons interested, and impose such terms as a condition of granting leave, and make such other order in 
the matter as the Tribunal considers just and proper. 

(4)  The  Company  Liquidator  shall  not  be  entitled  to  disclaim  any  property  in  any  case  where  an 
application in writing has been made to him by any person interested in the property requiring him to decide 
whether he will or will not disclaim and the Company Liquidator has not, within a period of twenty-eight 
days after the receipt of the application or such extended period as may be allowed by the Tribunal, give 
notice to the applicant that he intends to apply to the Tribunal for leave to disclaim, and in case the property 
is under a contract, if the Company Liquidator after such an application as aforesaid does not within the 
said period or extended period disclaim the contract, he shall be deemed to have adopted it. 

(5) The Tribunal may, on the application of any person who is, as against the Company Liquidator, 
entitled  to  the  benefit  or  subject  to  the  burden  of  a  contract  made  with  the  company,  make  an  order 
rescinding the contract on such terms as to payment by or to either party of damages for the                      non-
performance  of  the  contract,  or  otherwise  as  the  Tribunal  considers  just  and  proper,  and  any  damages 
payable under the order to any such person maybe proved by him as a debt in the winding up. 

(6) The Tribunal may, on an application by any person who either claims any interest in any disclaimed 
property or is under any liability not discharged under this Act in respect of any disclaimed property, and 

186 

 
after hearing any such persons as it thinks fit, make an order for the vesting of the property in, or the delivery 
of the property to, any person entitled thereto or to whom it may seem just that the property should be 
delivered by way of compensation for such liability as aforesaid, or a trustee for him, and on such terms as 
the Tribunal considers just and proper, and on any such vesting order being made, the property comprised 
therein  shall  vest  accordingly  in  the  person  named  therein  in  that  behalf  without  any  conveyance  or 
assignment for the purpose: 

Provided that where the property disclaimed is of a leasehold nature, the Tribunal shall not make a 
vesting order in favour of any person claiming under the company, whether as under-lessee or as mortgagee 
or holder of a charge by way of demise, except upon the terms of making that person— 

(a) subject to the same liabilities and obligations as those to which the company was subject under 

the lease in respect of the property at the commencement of the winding up; or 

(b) if the Tribunal thinks fit, subject only to the same liabilities and obligations as if the lease had 

been assigned to that person at that date, 

and in either event as if the lease had comprised only the property comprised in the vesting order, and any 
mortgagee or under-lessee declining to accept a vesting order upon such terms shall be excluded from all 
interest in, and security upon the property, and, if there is no person claiming under the company who is 
willing to accept an order upon such terms, the Tribunal shall have power to vest the estate and interest of 
the company in the property in any person liable, either personally or in a representative character, and 
either  alone  or  jointly  with  the  company,  to  perform  the  covenants  of  the  lessee  in  the  lease,  free  and 
discharged from all estates, encumbrances and interests created therein by the company. 

(7) Any person affected by the operation of a disclaimer under this section shall be deemed to be a 
creditor of the company to the amount of the compensation or damages payable in respect of such effect, 
and may accordingly prove the amount as a debt in the winding up. 

1[334. Transfers, etc., after commencement of winding up to be void.—In the case of a winding up 
by  the  Tribunal,  any  disposition  of  the  property  including  actionable  claims,  of  the  company  and  any 
transfer of shares in the company or alteration in the status of its members, made after the commencement 
of the winding up shall, unless the Tribunal otherwise orders, be void.] 

335. Certain attachments, executions, etc., in winding up by Tribunal to be void.—(1) Where any 

company is being wound up by the Tribunal,— 

(a) any attachment, distress or execution put in force, without leave of the Tribunal against the 

estate or effects of the company, after the commencement of the winding up; or 

(b) any sale held, without leave of the Tribunal of any of the properties or effects of the company, 

after such commencement, 

shall be void. 

(2) Nothing in this section shall apply to any proceedings for the recovery of any tax or impost or any 

dues payable to the Government. 

336. Offences by officers of companies in liquidation.—(1) If any person, who is or has been an 
officer of a company which, at the time of the commission of the alleged offence, is being wound up, 2[by 
the Tribunal under this Act or which is subsequently ordered to be wound up by the Tribunal under this 
Act],— 

(a)  does  not,  to  the  best  of  his  knowledge  and  belief,  fully  and  truly  disclose  to  the  Company 
Liquidator all the property, movable and immovable, of the company, and how and to whom and for 
what consideration and when the company disposed of any part thereof, except such part as has been 
disposed of in the ordinary course of the business of the company; 

(b) does not deliver up to the Company Liquidator, or as he directs, all such part of the movable 
and  immovable  property  of  the  company  as  is  in  his  custody  or  under  his  control  and  which  he  is 
required by law to deliver up; 

1. Subs. by Act 31 of 2016, s. 255 and the Eleventh Schedule, for section 334 (w.e.f. 15-11-2016). 
2. Subs. by s. 255 and the Eleventh Schedule, ibid., for “whether by the Tribunal or voluntarily, or which is subsequently ordered 

to be wound up by the Tribunal or which subsequently passes a resolution for voluntary winding up” (w.e.f. 15-11-2016). 

187 

 
                                                           
(c) does not deliver up to the Company Liquidator, or as he directs, all such books and papers of 

the company as are in his custody or under his control and which he is required by law to deliver up; 

(d) within the twelve months immediately before the commencement of the winding up or at any 

time thereafter,— 

(i) conceals any part of the property of the company to the value of one thousand rupees or 

more, or conceals any debt due to or from the company; 

(ii) fraudulently removes any part of the property of the company to the value of one thousand 

rupees or more; 

(iii)  conceals,  destroys,  mutilates  or  falsifies,  or  is  privy  to  the  concealment,  destruction, 
mutilation or falsification of, any book or paper affecting or relating to, the property or affairs of 
the company; 

(iv) makes, or is privy to the making of, any false entry in any book or paper affecting or relating 

to, the property or affairs of the company; 

(v) fraudulently parts with, alters or makes any omission in, or is privy to the fraudulent parting 
with, altering or making of any omission in, any book or paper affecting or relating to the property 
or affairs of the company; 

(vi)  by  any  false  representation  or  other  fraud,  obtains  on  credit,  for  or  on  behalf  of  the 

company, any property which the company does not subsequently pay for; 

(vii) under the false pretence that the company is carrying on its business, obtains on credit, for 

or on behalf of the company, any property which the company does not subsequently pay for; or 

(viii) pawns, pledges or disposes of any property of the company which has been obtained on 
credit and has not been paid for, unless such pawning, pledging or disposing of the property is in 
the ordinary course of business of the company; 

(e) makes any material omission in any statement relating to the affairs of the company; 

(f) knowing or believing that a false debt has been proved by any person under the winding up, fails 

for a period of one month to inform the Company Liquidator thereof; 

(g)  after  the  commencement  of  the  winding  up,  prevents  the  production  of  any  book  or  paper 

affecting or relating to the property or affairs of the company; 

(h) after the commencement of the winding up or at any meeting of the creditors of the company 
within the twelve months next before the commencement of the winding up, attempts to account for 
any part of the property of the company by fictitious losses or expenses; or 

(i)  is  guilty  of any  false representation  or fraud for  the  purpose  of  obtaining  the  consent  of  the 
creditors of the company or any of them, to an agreement with reference to the affairs of the company 
or to the winding up, 

he shall be punishable with imprisonment for a term which shall not be less than three years but which may 
extend to five years and with fine which shall not be less than one lakh rupees but which may extend to 
three lakh rupees: 

Provided that it shall be a good defence if the accused proves that he had no intent to defraud or to 

conceal the true state of affairs of the company or to defeat the law. 

(2) Where any person pawns, pledges or disposes of any property in circumstances which amount to an 
offence under sub-clause (viii) of clause (d) of sub-section (1), every person who takes in pawn or pledge 
or otherwise receives the property, knowing it to be pawned, pledged, or disposed of in such circumstances 
as aforesaid, shall be punishable with imprisonment for a term which shall not be less than three years but 
which may extend to five years and with fine which shall not be less than three lakh rupees but which may 
extend to five lakh rupees. 

188 

 
Explanation.—For  the  purposes  of  this  section,  the  expression  “officer”  includes  any  person  in 
accordance with whose directions or instructions the directors of the company have been accustomed to 
act. 

337. Penalty for frauds by officers.—If any person, being at the time of the commission of the alleged 
offence an officer of a company which is subsequently ordered to be wound up by the Tribunal 1[under this 
Act]— 

(a) has, by false pretences or by means of any other fraud, induced any person to give credit to the 

company; 

(b) with intent to defraud creditors of the company or any other person, has made or caused to be 
made any gift or transfer of, or charge on, or has caused or connived at the levying of any execution 
against, the property of the company; or 

(c)  with  intent  to  defraud  creditors  of  the  company,  has  concealed  or  removed  any  part  of  the 
property of the company since the date of any unsatisfied judgment or order for payment of money 
obtained against the company or within two months before that date, 

he shall be punishable with imprisonment for a term which shall not be less than one year but which may 
extend to three years and with fine which shall not be less than one lakh rupees but which may extend to 
three lakh rupees. 

338. Liability where proper accounts not kept.—(1) Where a company is being wound up, if it is 
shown  that  proper  books  of  account  were not  kept  by  the  company  throughout  the  period  of  two  years 
immediately preceding the commencement of the winding up, or the period between the incorporation of 
the company and the commencement of the winding up, whichever is shorter, every officer of the company 
who is in default shall, unless he shows that he acted honestly and that in the circumstances in which the 
business of the company was carried on, the default was excusable, be punishable with imprisonment for a 
term which shall not be less than one year but which may extend to three years and with fine which shall 
not be less than one lakh rupees but which may extend to three lakh rupees. 

(2) For the purposes of sub-section (1), it shall be deemed that proper books of account have not been 

kept in the case of any company,— 

(a) if such books of account as are necessary to exhibit and explain the transactions and financial 
position of the business of the company, including books containing entries made from day-to-day in 
sufficient detail of all cash received and all cash paid, have not been kept; and 

(b) where the business of the company has involved dealings in goods, statements of the annual 
stock takings and, except in the case of goods sold by way of ordinary retail trade, of all goods sold and 
purchased, showing the goods and the buyers and the sellers thereof in sufficient detail to enable those 
goods and those buyers and sellers to be identified, have not been kept. 

339.  Liability  for  fraudulent  conduct  of  business.—(1)  If  in  the  course  of  the  winding  up  of  a 
company, it appears that any business of the company has been carried on with intent to defraud creditors 
of the company or any other persons or for any fraudulent purpose, the Tribunal, on the application of the 
Official Liquidator, or the Company Liquidator or any creditor or contributory of the company, may, if it 
thinks it proper so to do, declare that any person, who is or has been a director, manager, or officer of the 
company  or  any  persons who  were  knowingly  parties  to  the  carrying  on  of  the  business in  the  manner 
aforesaid shall be personally responsible, without any limitation of liability, for all or any of the debts or 
other liabilities of the company as the Tribunal may direct: 

Provided that on the hearing of an application under this sub-section, the Official Liquidator or the 

Company Liquidator, as the case may be, may himself give evidence or call witnesses. 

(2) Where the Tribunal makes any such declaration, it may  give such further directions as it thinks 

proper for the purpose of giving effect to that declaration and, in particular,— 

1. Subs. by Act 31 of 2016, s. 255 and the Eleventh Schedule, for “or which subsequently passes a resolution for voluntary winding 

up,” (w.e.f. 15-11-2016). 

189 

 
                                                           
(a) make provision for making the liability of any such person under the declaration a charge on 
any debt or obligation due from the company to him, or on any mortgage or charge or any interest in 
any mortgage or charge on any assets of the company held by or vested in him, or any person on his 
behalf, or any person claiming as assignee from or through the person liable or any person acting on 
his behalf; 

(b) make such further order as may be necessary for the purpose of enforcing any charge imposed 

under this sub-section. 

(3) Where any business of a company is carried on with such intent or for such purpose as is mentioned 
in sub-section (1), every person who was knowingly a party to the carrying on of the business in the manner 
aforesaid, shall be liable for action under section 447. 

(4) This section shall apply, notwithstanding that the person concerned may be punishable under any 
other law for the time being in force in respect of the matters on the ground of which the declaration is to 
be made. 

Explanation.—For the purposes of this section,— 

(a) the expression “assignee” includes any person to whom or in whose favour, by the directions 
of the person liable, the debt, obligation, mortgage or charge was created, issued or transferred or the 
interest  was  created,  but  does  not  include  an  assignee  for  valuable  consideration,  not  including 
consideration by way of marriage, given in good faith and without notice of any of the matters on the 
ground of which the declaration is made; 

(b) the expression “officer” includes any person in accordance with whose directions or instructions 

the directors of the company have been accustomed to act. 

340. Power of Tribunal to assess damages against delinquent directors, etc.—(1) If in the course 
of winding up of a company, it appears that any person who has taken part in the promotion or formation 
of the company, or any person, who is or has been a director, manager, Company Liquidator or officer of 
the company— 

(a) has misapplied, or retained, or become liable or accountable for, any money or property of the 

company; or 

(b) has been guilty of any misfeasance or breach of trust in relation to the company, 

the  Tribunal  may,  on  the  application  of  the  Official  Liquidator,  or  the  Company  Liquidator,  or  of  any 
creditor or contributory, made within the period specified in that behalf in sub-section (2), inquire into the 
conduct of the person, director, manager, Company Liquidator or officer aforesaid, and order him to repay 
or restore the money or property or any part thereof respectively, with interest at such rate as the Tribunal 
considers just and proper, or to contribute such sum to the assets of the company by way of compensation 
in respect of the misapplication, retainer, misfeasance or breach of trust, as the Tribunal considers just and 
proper. 

(2) An application under sub-section (1) shall be made within five years from the date of the winding 
up order, or of the first appointment of the Company Liquidator in the winding up, or of the misapplication, 
retainer, misfeasance or breach of trust, as the case may be, whichever is longer. 

(3) This section shall apply, notwithstanding that the matter is one for which the person concerned may 

be criminally liable. 

341.  Liability  under  sections  339  and  340  to  extend  to  partners  or  directors  in  firms  or 
companies.—Where a declaration under section 339 or an order under section 340 is made in respect of a 
firm or body corporate, the Tribunal shall also have power to make a declaration under section 339, or pass 
an order under section 340, as the case may be, in respect of any person who was at the relevant time a 
partner in that firm or a director of that body corporate. 

342. Prosecution of delinquent officers and members of company.—(1) If it appears to the Tribunal 
in the course of a winding up by the Tribunal, that any person, who is or has been an officer, or any member, 
of the company has been guilty of any offence in relation to the company, the Tribunal may, either on the 

190 

 
application of any person interested in the winding up or suo motu, direct the liquidator to prosecute the 
offender or to refer the matter to the Registrar. 

1* 

* 

* 

* 

* 

(5) When any prosecution is instituted under this section, it shall be the duty of the liquidator and of 
every person, who is or has been an officer and agent of the company to give all assistance in connection 
with the prosecution which he is reasonably able to give. 

Explanation.—For the purposes of this sub-section, the expression “agent”, in relation to a company, 
shall include any banker or legal adviser of the company and any person employed by the company as 
auditor. 

2* 

* 

* 

* 

* 

343.  Company  Liquidator  to  exercise  certain  powers  subject  to  sanction.—3[(1)  The  Company 
Liquidator may, with the sanction of the Tribunal, when the company is being wound up by the Tribunal,— 

(i) pay any class of creditors in full; 

(ii) make any compromise or arrangement with creditors or persons claiming to be creditors, or 
having or alleging themselves to have any claim, present or future, certain or contingent, against the 
company, or whereby the company may be rendered liable; or 

(iii) compromise any call or liability to call, debt, and liability capable of resulting in a debt, and 
any claim, present or future, certain or contingent, ascertained or sounding only in damages, subsisting 
or alleged to subsist between the company and a contributory or alleged contributory or other debtor or 
person apprehending liability to the company, and all questions in any way relating to or affecting the 
assets or liabilities or the winding up of the company, on such terms as may be agreed, and take any 
security for the discharge of any such call, debt, liability or claim, and give a complete discharge in 
respect thereof.] 

(2) Notwithstanding anything contained in sub-section (1), in the case of a winding up by the Tribunal, 
the  Central  Government  may  make  rules  to  provide  that  the  Company  Liquidator  may,  under  such 
circumstances,  if  any,  and  subject  to  such  conditions,  restrictions  and  limitations,  if  any,  as  may  be 
prescribed,  exercise  any  of  the  powers  referred  to  in  sub-clause  (ii)  or  sub-clause  (iii)  of  clause  (b)  of          
sub-section (1) without the sanction of the Tribunal. 

(3) Any creditor or contributory may apply in the manner prescribed to the Tribunal with respect to any 
exercise or proposed exercise of powers by the Company Liquidator under this section, and the Tribunal 
shall after giving a reasonable opportunity to such applicant and the Company Liquidator, pass such orders 
as it may think fit. 

344. Statement that company is in liquidation.—(1) Where a company is being wound up, whether 
by the Tribunal or voluntarily, every invoice, order for goods or business letter issued by or on behalf of 
the company or a Company Liquidator of the company, or a receiver or manager of the property of the 
company, being a document on or in which the name of the company appears, shall contain a statement that 
the company is being wound up. 

(2) If a company contravenes the provisions of sub-section (1), the company, and every officer of the 
company, the Company Liquidator and any receiver or  manager, who wilfully authorises or permits the 
non-compliance, shall be punishable with fine which shall not be less than fifty thousand rupees but which 
may extend to three lakh rupees. 

345. Books and papers of company to be evidence.—Where a company is being wound up, all books 
and  papers  of  the  company  and  of  the  Company  Liquidator  shall,  as  between  the  contributories  of  the 
company, be prima facie evidence of the truth of all matters purporting to be recorded therein. 

1. Sub-sections (2), (3) and (4) omitted by Act 31 of 2016, s. 255 and the Eleventh Schedule (w.e.f. 15-11-2016). 
2. Sub-section (6) omitted by Act 29 of 2020, s. 48 (w.e.f. 21-12-2020). 
3. Subs. by Act 31 of 2016, s. 255 and the Eleventh Schedule, for sub-section (1) (w.e.f. 15-11-2016). 

191 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
346. Inspection of books and papers by creditors and contributories.—(1) At any time after the 
making of an order for the winding up of a company by the Tribunal, any creditor or contributory of the 
company may inspect the books and papers of the company only in accordance with, and subject to such 
rules as may be prescribed. 

(2) Nothing contained in sub-section (1) shall exclude or restrict any rights conferred by any law for 

the time being in force— 

(a) on the Central Government or a State Government; 

(b) on any authority or officer thereof; or 

(c) on any person acting under the authority of any such Government or of any such authority or 

officer. 

347. Disposal of books and papers of company.—1[(1) When the affairs of a company have been 
completely wound up and it is about to be dissolved, the books and papers of such company and those of 
the Company Liquidator may be disposed of in such manner as the Tribunal directs.] 

(2) After the expiry of five years from the dissolution of the company, no responsibility shall devolve 
on the company, the Company Liquidator, or any person to whom the custody of the books and papers has 
been  entrusted,  by  reason  of  any  book  or  paper  not  being  forthcoming  to  any  person  claiming  to  be 
interested therein. 

(3) The Central Government may, by rules,— 

(a) prevent for such period as it thinks proper the destruction of the books and papers of a company 

which has been wound up and of its Company Liquidator; and 

(b)  enable  any  creditor  or  contributory  of  the  company  to  make  representations  to  the  Central 
Government in respect of the matters specified in clause (a) and to appeal to the Tribunal from any 
order which may be made by the Central Government in the matter. 

(4) If any person acts in contravention of any rule framed or an order made under sub-section (3), he 

shall be punishable 2*** with fine which may extend to 3[fifty thousand rupees]. 

348. Information as to pending liquidations.—4[(1) If the winding up of a company is not concluded 
within one year after its commencement, the Company Liquidator shall,  unless he is exempted from so 
doing, either wholly or in part by the Central Government, within two months of the expiry of such year 
and thereafter until the winding up is concluded, at intervals of not more than one year or at such shorter 
intervals, if any, as may be prescribed, file a statement in such form containing such particulars as may be 
prescribed,  duly  audited,  by  a  person  qualified  to  act  as  auditor  of  the  company,  with  respect  to  the 
proceedings in, and position of, the liquidation, with the Tribunal: 

Provided that no such audit as is referred to in this sub-section shall be necessary where the provisions 

of section 294 apply.] 

(2)  When  the  statement  is  filed  with  the  Tribunal  under  clause  (a)  of  sub-section  (1),  a  copy  shall 
simultaneously be filed with the Registrar and shall be kept by him along with the other records of the 
company. 

(3) Where a statement referred to in sub-section (1) relates to a Government company in liquidation, 

the Company Liquidator shall forward a copy thereof— 

(a) to the Central Government, if that Government is a member of the Government company; 

(b) to any State Government, if that Government is a member of the Government company; or 

1. Subs. by Act 31 of 2016, s. 255 and the Eleventh Schedule, for sub-section (1) (w.e.f. 15-11-2016). 
2. The words “with imprisonment for a term which may extend to six months or” omitted by Act 29 of 2020, s. 49 (w.e.f. 21-12-

2020). 

3. Subs. by s. 49, ibid., for “fifty thousand rupees, or with both” (w.e.f. 21-12-2020). 
4. Subs. by s. 255 and the Eleventh Schedule, ibid., for sub-section (1) (w.e.f. 15-11-2016). 

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(c) to the Central Government and any State Government, if both the Governments are members 

of the Government company. 

(4)  Any  person  stating  himself  in  writing  to  be  a  creditor  or  contributory  of  the  company  shall  be 
entitled, by himself or by his agent, at all reasonable times, on payment of the prescribed fee, to inspect the 
statement referred to in sub-section (1), and to receive a copy thereof or an extract there from. 

(5) Any person fraudulently stating himself to be a creditor or contributory under sub-section (4) shall 
be deemed to be guilty of an offence under section 182 of the Indian Penal Code (45 of 1860), and shall, 
on the application of the Company Liquidator, be punishable accordingly. 

1[(6) Where a Company Liquidator, who is an insolvency professional registered under the Insolvency 
and Bankrupt Code, 2016 (31 of 2016) is in default in complying with the provisions of this section, then 
such default shall be deemed to be a contravention of the provisions of the said Code, and the rules and 
regulations made thereunder for the purpose of proceedings under chapter VI of Part IV of that Code.] 

2* 

* 

* 

* 

* 

349.  Official  Liquidator  to  make  payments  into  public  account  of  India.—Every  Official 
Liquidator shall, in such manner and at such times as may be prescribed, pay the monies received by him 
as Official Liquidator of any company, into the public account of India in the Reserve Bank of India. 

350. Company Liquidator to deposit monies into scheduled bank.—(1) Every Company Liquidator 
of a company shall, in such manner and at such times as may be prescribed, deposit the monies received by 
him in his capacity as such in a scheduled bank to the credit of a special bank account opened by him in 
that behalf: 

Provided that if the Tribunal considers that it is advantageous for the creditors or contributories or the 

company, it may permit the account to be opened in such other bank specified by it. 

(2) If any Company Liquidator at any time retains for more than ten days a sum exceeding five thousand 
rupees or such other amount as the Tribunal may, on the application of the Company Liquidator, authorise 
him to retain, then, unless he explains the retention to the satisfaction of the Tribunal, he shall— 

(a) pay interest on the amount so retained in excess, at the rate of twelve per cent. per annum and 

also pay such penalty as may be determined by the Tribunal; 

(b) be liable to pay any expenses occasioned by reason of his default; and 

(c) also be liable to have all or such part of his remuneration, as the Tribunal may consider just and 

proper, disallowed, or may also be removed from his office. 

351.  Liquidator  not  to  deposit  monies  into  private  banking  account.—Neither  the  Official 
Liquidator  nor the  Company  Liquidator  of  a  company  shall deposit  any  monies  received  by  him  in  his 
capacity as such into any private banking account. 

352. Company Liquidation Dividend and Undistributed Assets Account.—(1) Where any company 

is being wound up and the liquidator has in his hands or under his control any money representing— 

(a) dividends payable to any creditor but which had remained unpaid for six months after the date 

on which they were declared; or 

(b) assets refundable to any contributory which have remained undistributed for six months after 

the date on which they become refundable, 

the liquidator shall forthwith deposit the said money into a  separate special account to be known as the 
Company Liquidation Dividend and Undistributed Assets Account maintained in a scheduled bank. 

(2) The liquidator shall, on the dissolution of the company, pay into the Company Liquidation Dividend 
and Undistributed Assets Account any money representing unpaid dividends or undistributed assets in his 
hands at the date of dissolution. 

1. Subs. by Act 29 of 2020, s. 50, for sub-section (6) (w.e.f. 21-12-2020). 
2. Sub-section (7) omitted by Act 29 of 2020,  s. 50 (w.e.f. 21-12-2020). 

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(3) The liquidator shall, when making any payment referred to in sub-sections (1) and (2), furnish to 
the  Registrar,  a  statement  in  the  prescribed  form,  setting  forth,  in  respect  of  all  sums  included  in  such 
payment, the nature of the sums, the names and last known addresses of the persons entitled to participate 
therein, the amount to which each is entitled and the nature of his claim thereto, and such other particulars 
as may be prescribed. 

(4) The liquidator shall be entitled to a receipt from the scheduled bank for any money paid to it under 
sub-sections (1) and (2), and such receipt shall be an effectual discharge of the Company Liquidator in 
respect thereof. 

(5)  Where  a  company  is  being  wound  up  voluntarily,  the  Company  Liquidator  shall,  when  filing  a 
statement in pursuance of sub-section (1) of section 348, indicate the sum of money which is payable under 
sub-sections (1) and (2) of this section during the six months preceding the date on which the said statement 
is prepared, and shall, within fourteen days of the date of filing the said statement, pay that sum into the 
Company Liquidation Dividend and Undistributed Assets Account. 

(6) Any person claiming to be entitled to any money paid into the Company Liquidation Dividend and 
Undistributed Assets Account, whether paid in pursuance of this section or under the provisions of any 
previous company law may apply to the Registrar for payment thereof, and the Registrar, if satisfied that 
the person claiming is entitled, may make the payment to that person of the sum due: 

Provided that the Registrar shall settle the claim of such person within a period of sixty days from the 
date of receipt of such claim, failing which the Registrar shall make a report to the Regional Director giving 
reasons of such failure. 

(7)  Any  money  paid  into  the  Company  Liquidation  Dividend  and  Undistributed  Assets  Account  in 
pursuance  of  this  section,  which  remains  unclaimed  thereafter  for  a  period  of  fifteen  years,  shall  be 
transferred  to  the  general  revenue  account  of  the  Central  Government,  but  a  claim  to  any  money  so 
transferred may be preferred under sub-section (6) and shall be dealt with as if such transfer had not been 
made and the order, if any, for payment on the claim will be treated as an order for refund of revenue. 

(8)  Any  liquidator  retaining  any  money  which  should  have  been  paid  by  him  into  the  Company 

Liquidation Dividend and Undistributed Assets Account under this section shall— 

(a) pay interest on the amount so retained at the rate of twelve per cent. per annum and also pay 

such penalty as may be determined by the Registrar: 

Provided that the Central Government may in any proper case remit either in part or in whole the 

amount of interest which the liquidator is required to pay under this clause; 

(b) be liable to pay any expenses occasioned by reason of his default; and 

(c)  where  the  winding  up  is  by  the  Tribunal,  also  be  liable  to  have  all  or  such  part  of  his 
remuneration, as the Tribunal may consider just and proper, to be disallowed, and to be removed from 
his office by the Tribunal. 

353. Liquidator to make returns, etc.—(1) If any Company Liquidator who has made any default in 
filing, delivering or making any return, account or other document, or in giving any notice which he is by 
law required to file, deliver, make or give, fails to make good the default within fourteen days after the 
service on him of a notice requiring him to do so, the Tribunal may, on an application made to it by any 
contributory  or  creditor  of  the  company  or  by  the  Registrar,  make  an  order  directing  the  Company 
Liquidator to make good the default within such time as may be specified in the order. 

(2) Any order under sub-section (1) may provide that all costs of, and incidental to, the application shall 

be borne by the Company Liquidator. 

(3)  Nothing  in  this  section  shall  prejudice  the  operation  of  any  enactment  imposing  penalties  on  a 

Company Liquidator in respect of any such default as aforesaid. 

354. Meetings to ascertain wishes of creditors or contributories.—(1) In all matters relating to the 

winding up of a company, the Tribunal may— 

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(a) have regard to the wishes of creditors or contributories of the company, as proved to it by any 

sufficient evidence; 

(b) if it thinks fit for the purpose of ascertaining those wishes, direct meetings of the creditors or 

contributories to be called, held and conducted in such manner as the Tribunal may direct; and 

(c) appoint a person to act as chairman of any such meeting and to report the result thereof to the 

Tribunal. 

(2) While ascertaining the wishes of creditors under sub-section (1), regard shall be had to the value of 

each debt of the creditor. 

(3) While ascertaining the wishes of contributories under sub-section (1), regard shall be had to the 

number of votes which may be cast by each contributory. 

355.  Court,  tribunal  or  person,  etc.,  before  whom  affidavit  may  be  sworn.—(1)  Any  affidavit 

required to be sworn under the provisions, or for the purposes, of this Chapter may be sworn— 

(a)  in  India  before  any  court,  tribunal,  judge  or  person  lawfully  authorised  to  take  and  receive 

affidavits; and 

(b) in any other country before any court, judge or person lawfully authorised to take and receive 

affidavits in that country or before an Indian diplomatic or consular officer. 

(2)  All  tribunals,  judges,  Justices,  commissioners  and  persons  acting  judicially  in  India  shall  take 
judicial notice of the seal, stamp or signature, as the case may be, of any such court, tribunal, judge, person, 
diplomatic  or  consular  officer,  attached,  appended  or  subscribed  to  any  such  affidavit  or  to  any  other 
document to be used for the purposes of this Chapter. 

356. Powers of Tribunal to declare dissolution of company void.—(1) Where a company has been 
dissolved, whether in pursuance of this Chapter or of section 232 or otherwise, the Tribunal may at any 
time  within  two  years  of  the  date  of  the  dissolution,  on  application  by  the  Company  Liquidator  of  the 
company or by any other person who appears to the Tribunal to be interested, make an order, upon such 
terms as the Tribunal thinks fit, declaring the dissolution to be void, and thereupon such proceedings may 
be taken as if the company had not been dissolved. 

1[(2) The Tribunal shall— 

(a) forward a copy of the order, within thirty days from the date thereof, to the Registrar who shall 

record the same; and  

(b) direct the Company Liquidator or the person on whose application the order was made, to file 
a certified copy of the order, within thirty days from the date thereof such further period as allowed by 
the Tribunal, with the Registrar who shall record the same.] 

2[357. Commencement of winding up by Tribunal.—The winding up of a company by the Tribunal 
under this Act shall be deemed to commence at the time of the presentation of the petition for the winding 
up.] 

358. Exclusion of certain time in computing period of limitation.—Notwithstanding anything in the 
Limitation Act, 1963 (36 of 1963), or in any other law for the time being in force, in computing the period 
of limitation specified for any suit or application in the name and on behalf of a company which is being 
wound up by the Tribunal, the period from the date of commencement of the winding up of the company 
to a period of one year immediately following the date of the winding up order shall be excluded. 

PART IV.—Official Liquidators 

359. Appointment of Official Liquidator.—(1) For the purposes of this Act, so far as it relates to the 
winding  up  of  companies  by  the  Tribunal,  the  Central  Government  may  appoint  as  many  Official 
Liquidators, Joint, Deputy or Assistant Official Liquidators as it may consider necessary to discharge the 
functions of the Official Liquidator. 

1. Subs.by Act 29 of 2020, s. 51, for sub-section (2) (w.e.f. 21-12-2020). 
2. Subs. by Act 31 of 2016, s. 255 and the Eleventh Schedule, for section 357 (w.e.f. 15-11-2016). 

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(2)  The  liquidators  appointed  under  sub-section  (1)  shall  be  whole-time  officers  of  the  Central 

Government. 

(3) The salary and other allowances of the Official Liquidator, Joint Official Liquidator, Deputy Official 

Liquidator and Assistant Official Liquidator shall be paid by the Central Government. 

360. Powers and functions of Official Liquidator.—(1) The Official Liquidator shall exercise such 

powers and perform such duties as the Central Government may prescribe. 

(2) Without prejudice to the provisions of sub-section (1), the Official Liquidator may— 

(a)  exercise  all  or  any  of  the  powers  as  may  be  exercised  by  a  Company  Liquidator  under  the 

provisions of this Act; and 

(b) conduct inquiries or investigations, if directed by the Tribunal or the Central Government, in 

respect of matters arising out of winding up proceedings. 

361.  Summary  procedure  for  liquidation.—(1)  Where  the  company  to  be  wound  up  under  this 

Chapter, — 

(i) has assets of book value not exceeding one crore rupees; and 

(ii) belongs to such class or classes of companies as may be prescribed, 

the Central Government may order it to be wound up by summary procedure provided under this Part. 

(2) Where an order under sub-section (1) is made, the Central Government shall appoint the Official 

Liquidator as the liquidator of the company. 

(3)  The  Official  Liquidator  shall  forthwith  take  into  his  custody  or  control  all  assets,  effects  and 

actionable claims to which the company is or appears to be entitled. 

(4) The Official Liquidator shall, within thirty days of his appointment, submit a report to the Central 
Government in such manner and form, as may be prescribed, including a report whether in his opinion, any 
fraud has been committed in promotion, formation or management of the affairs of the company or not. 

(5) On receipt of the report under sub-section (4), if the Central Government is satisfied that any fraud 
has been committed by the promoters, directors or any other officer of the company, it may direct further 
investigation into the affairs of the company and that a report shall be submitted within such time as may 
be specified. 

(6) After considering the investigation report under sub-section (5), the Central Government may order 

that winding up may be proceeded under Part I of this Chapter or under the provision of this Part. 

362.  Sale  of  assets  and  recovery  of  debts  due  to  company.—(1)  The  Official  Liquidator  shall 
expeditiously dispose of all the assets whether movable or immovable within sixty days of his appointment. 

(2) The Official Liquidator shall serve a notice within thirty days of his appointment calling upon the 
debtors of the company or the contributories, as the case may be, to deposit within thirty days with him the 
amount payable to the company. 

(3) Where any debtor does not deposit the amount under sub-section (2), the Central Government may, 

on an application made to it by the Official Liquidator, pass such orders as it thinks fit. 

(4) The amount recovered under this section by the Official Liquidator shall be deposited in accordance 

with the provisions of section 349. 

363. Settlement of claims of creditors by Official Liquidator.—(1) The Official Liquidator within 
thirty days of his appointment shall call upon the creditors of the company to prove their claims in such 
manner as may be prescribed, within thirty days of the receipt of such call. 

(2)  The  Official  Liquidator  shall  prepare  a  list  of  claims  of  creditors  in  such  manner  as  may  be 
prescribed and each creditor shall be communicated of the claims accepted or rejected along with reasons 
to be recorded in writing. 

196 

 
364. Appeal by creditor.—(1) Any creditor aggrieved by the decision of the Official Liquidator under 

section 363 may file an appeal before the Central Government within thirty days of such decision. 

(2) The Central Government may after calling the report from the Official Liquidator either dismiss the 

appeal or modify the decision of the Official Liquidator. 

(3) The Official Liquidator shall make payment to the creditors whose claims have been accepted. 

(4) The Central Government may, at any stage during settlement of claims, if considers necessary, refer 

the matter to the Tribunal for necessary orders. 

365. Order of dissolution of company.—(1) The Official Liquidator shall, if he is satisfied that the 

company is finally wound up, submit a final report to— 

(i) the Central Government, in case no reference was made to the Tribunal under sub-section (4) of 

section 364; and 

(ii) in any other case, the Central Government and the Tribunal. 

(2) The Central Government, or as the case may be, the Tribunal on receipt of such report shall order 

that the company be dissolved. 

(3) Where an order is made under sub-section (2), the Registrar shall strike off the name of the company 

from the register of companies and publish a notification to this effect. 

CHAPTER XXI 
PART I.— Companies Authorised to Register under this Act 

366. Companies capable of being registered.—(1) For the purposes of this Part, the word “company” 
includes  any  partnership  firm,  limited  liability  partnership,  cooperative  society,  society  or  any  other 
business entity formed under any other law for the time being in force which applies for registration under 
this Part. 

(2) With the exceptions and subject to the provisions contained in this section, any company formed, 
whether before or after the commencement of this Act, in pursuance of any Act of Parliament other than 
this Act or of any other law for the time being in force or being otherwise duly constituted according to 
law, and consisting of  1[two or more members], may at any time register under this Act as an unlimited 
company, or as a company limited by shares, or as a company limited by guarantee, in such manner as may 
be prescribed and the registration shall not be invalid by reason only that it has taken place with a view to 
the company’s being wound up: 

Provided that— 

(i) a company registered under the Indian Companies Act, 1882 (6 of 1882) or under the Indian 
Companies  Act,  1913  (7  of  1913)  or  the  Companies  Act,  1956  (1  of  1956),  shall  not  register  in 
pursuance of this section; 

(ii) a company having the liability of its members limited by any Act of Parliament other than this 
Act or by any other law for the time being in force, shall not register in pursuance of this section as an 
unlimited company or as a company limited by guarantee; 

(iii) a company shall be registered in pursuance of this section as a company limited by shares only 
if it has a permanent paid-up or nominal share capital of fixed amount divided into shares, also of fixed 
amount, or held and transferable as stock, or divided and held partly in the one way and partly in the 
other, and formed on the principle of having for its members the holders of those shares or that stock, 
and no other persons; 

(iv) a company shall not register in pursuance of this section without the assent of a majority of 
such  of  its  members  as are  present  in person,  or  where  proxies are allowed, by  proxy,  at a  general 
meeting summoned for the purpose; 

(v) where a company not having the liability of its members limited by any Act of Parliament or 
any other law for the time being in force is about to register as a limited company, the majority required 
to assent as aforesaid shall consist of not less than three-fourths of the members present in person, or 
where proxies are allowed, by proxy, at the meeting; 

1. Subs. by Act 1 of 2018, s. 75, for “seven or more members” (w.e.f. 15-8-2018). 

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(vi) where a company is about to register as a company limited by guarantee, the assent to its being 
so registered shall be accompanied by a resolution declaring that each member undertakes to contribute 
to the assets of the company, in the event of its being wound up while he is a member, or within one 
year after he ceases to be a member, for payment of the debts and liabilities of the company or of such 
debts and liabilities as may have been contracted before he ceases to be a member, and of the costs, 
charges and expenses of winding up, and for the adjustment of the rights of the contributories among 
themselves, such amount as may be required, not exceeding a specified amount. 
1[(vii) a company with less than seven members shall register as a private company.] 

(3) In computing any majority required for the purposes of sub-section (1), when a poll is demanded, 
regard shall be had to the number of votes to which each member is entitled according to the regulations of 
the company. 

367. Certificate of registration of existing companies.—On compliance with the requirements of this 
Chapter with respect to registration, and on payment of such fees, if any, as are payable under section 403, 
the Registrar shall certify under his hand that the company applying for registration is incorporated as a 
company under this Act, and in the case of a limited company that it is limited and thereupon the company 
shall be so incorporated. 

368.  Vesting  of  property  on  registration.—All  property,  movable  and  immovable  (including 
actionable claims), belonging to or vested in a company at the date of its registration in pursuance of this 
Part, shall, on such registration, pass to and vest in the company as incorporated under this Act for all the 
estate and interest of the company therein. 

369. Saving of existing liabilities.—The registration of a company in pursuance of this Part shall not 
affect its rights or liabilities in respect of any debt or obligation incurred, or any contract entered into, by, 
to, with, or on behalf of, the company before registration. 

370. Continuation of pending legal proceedings.—All suits and other legal proceedings taken by or 
against  the  company,  or  any  public  officer  or  member  thereof,  which  are  pending  at  the  time  of  the 
registration  of  a  company  in  pursuance  of  this  Part,  may  be  continued  in  the  same  manner  as  if  the 
registration had not taken place: 

Provided that execution shall not issue against the property or persons of any individual member of the 
company on any decree or order obtained in any such suit or proceeding; but, in the event of the property 
of the company being insufficient to satisfy the decree or order, an order may be obtained for winding up 
the company  2[in accordance with the provisions of this Act or of the Insolvency and Bankruptcy Code, 
2016 (31 of 2016)]. 

371. Effect of registration under this Part.—(1) When a company is registered in pursuance of this 

Part, sub-sections (2) to (7) shall apply. 

(2) All provisions contained in any Act of Parliament or any other law for the time being in force, or 
other instrument constituting or regulating the company, including, in the case of a company registered as 
a company limited by guarantee, the resolution declaring the amount of the guarantee, shall be deemed to 
be conditions and regulations of the company, in the same manner and with the same incidents as if so 
much thereof as would, if the company had been formed under this Act, have been required to be inserted 
in the memorandum, were contained in a registered memorandum, and the residue thereof were contained 
in registered articles. 

(3)  All  the  provisions  of  this  Act  shall  apply  to  the  company  and  the  members,  contributories  and 
creditors thereof, in the same  manner in all respects as if it had been formed under this Act, subject as 
follows:— 

(a) Table F in Schedule I shall not apply unless and except in so far as it is adopted by special 

resolution; 

(b) the provisions of this Act relating to the numbering of shares shall not apply to any company 

whose shares are not numbered; 

1. Ins. by Act 1 of 2018, s. 75 (w.e.f. 15-8-2018). 
2. Ins. by Act 31 of 2016, s. 255 and the Eleventh Schedule (w.e.f. 15-11-2016). 

198 

 
                                                           
(c) in the event of the company being wound up, every person shall be a contributory, in respect of 
the debts and liabilities of the company contracted before registration, who is liable to pay or contribute 
to  the  payment  of  any  debt  or  liability  of  the  company  contracted  before  registration,  or  to  pay  or 
contribute to the payment of any sum for the adjustment of the rights of the members among themselves 
in respect of any such debt or liability, or to pay or contribute to the payment of the costs, charges and 
expenses of winding up the company, so far as relates to such debts or liabilities as aforesaid; 

(d) in the event of the company being wound up, every contributory shall be liable to contribute to 
the assets of the company, in the course of the winding up, all sums due from him in respect of any 
such liability as aforesaid; and in the event of the death or insolvency of any contributory, the provisions 
of this Act with respect to the legal representatives of deceased contributories, or with respect to the 
assignees of insolvent contributories, as the case may be, shall apply. 

(4) The provisions of this Act with respect to— 

(a) the registration of an unlimited company as a limited company; 

(b)  the  powers  of  an  unlimited  company  on  registration  as  a  limited  company,  to  increase  the 
nominal amount of its share capital and to provide that a portion of its share capital shall not be capable 
of being called-up except in the event of winding up; 

(c)  the  power of  a limited company  to  determine that  a  portion  of  its  share  capital  shall  not be 

capable of being called-up except in the event of winding up, 

shall apply, notwithstanding anything in any Act of Parliament or any other law for the time being in force, 
or other instrument constituting or regulating the company. 

(5) Nothing in this section shall authorise the company to alter any such provisions contained in any 
instrument constituting or regulating the company as would, if the company had originally been formed 
under this Act, have been required to be contained in the memorandum and are not authorised to be altered 
by this Act. 

(6) None of the provisions of this Act (apart from those of section 242) shall derogate from any power 
of altering its constitution or regulations which may  be vested in the company, by virtue of any Act of 
Parliament or any other law for the time being in force, or other instrument constituting or regulating the 
company. 

(7)  In  this  section,  the  expression  “instrument” includes  deed  of  settlement,  deed  of  partnership, or 

limited liability partnership. 

372.  Power  of  Court  to  stay  or  restrain  proceedings.—The  provisions  of  this  Act  1[or  of  the 
Insolvency  and  Bankruptcy  Code,  2016  (31  of  2016),  as  the  case  may  be,]  with  respect  to  staying  and 
restraining  suits  and  other  legal  proceedings  against  a  company  at  any  time  after  the  presentation  of  a 
petition  for  winding  up  and  before  the  making  of  a  winding  up  order,  shall,  in  the  case  of  a  company 
registered in pursuance of this Part, where the application to stay or restrain is by a creditor, extend to suits 
and other legal proceedings against any contributory of the company. 

373.  Suits  stayed  on  winding  up  order.—Where  an  order  has  been  made  for  winding  up,  or  a 
provisional liquidator has been appointed for, a company registered in pursuance of this Part, no suit or 
other legal proceeding shall be proceeded with or commenced against the company or any contributory of 
the company in respect of any debt of the company, except by leave of the Tribunal and except on such 
terms as the Tribunal may impose. 

374.  Obligations  of  companies  registering  under  this  Part.—Every  company  which  is  seeking 

registration under this Part shall,— 

(a) ensure that secured creditors of the company, prior to its registration under this Part, have either 

consented to or have given their no objection to company's registration under this Part; 

(b) publish in a newspaper, advertisement one in English and one in vernacular language in such 
form  as  may  be  prescribed  giving  notice  about  registration  under  this  Part,  seeking  objections  and 
address them suitably; 

1.  The proviso ins. by Act 31 of 2016, s. 255 and the Eleventh Schedule (w.e.f. 15-11-2016). 

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(c) file an affidavit, duly not arised, from all the members or partners to provide that in the event 
of registration under this Part, necessary documents or papers shall be submitted to the registering or 
other authority with which the company was earlier registered, for its dissolution as partnership firm, 
limited liability partnership, cooperative society, society or any other business entity, as the case may 
be. 

(d) comply with such other conditions as may be prescribed. 

1[Provided  that  upon  registration  as a company under this Part a limited liability partnership incorporated under 
the Limited Liability Partnership Act, 2008 (6 of 2009) shall be deemed to have been dissolved under that Act without 
any further act or deed.] 

PART II.—Winding up of unregistered companies 

375.  Winding  up  of  unregistered  companies.—(1)  Subject  to  the  provisions  of  this  Part,  any 
unregistered company may be wound up under this Act, in such manner as may be prescribed, and all the 
provisions  of  this  Act,  with  respect  to  winding  up  shall  apply  to  an  unregistered  company,  with  the 
exceptions and additions mentioned in sub-sections (2) to (4). 

(2) No unregistered company shall be wound up under this Act voluntarily. 
(3) An unregistered company may be wound up under the following circumstances, namely:— 

(a) if the company is dissolved, or has ceased to carry on business, or is carrying on business only 

for the purpose of winding up its affairs; 

(b) if the company is unable to pay its debts; 

(c) if the Tribunal is of opinion that it is just and equitable that the company should be wound up. 

(4) An unregistered company shall, for the purposes of this Act, be deemed to be unable to pay its 

debts— 

(a) if a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding 
one lakh rupees then due, has served on the company, by leaving at its principal place of business, or 
by delivering to the secretary, or some director, manager or principal officer of the company, or by 
otherwise  serving  in  such manner  as  the Tribunal  may  approve  or  direct,  a  demand  under  his hand 
requiring the company to pay the sum so due, and the company has, for three weeks after the service 
of  the  demand,  neglected  to  pay  the  sum  or  to  secure  or  compound  for  it  to  the  satisfaction  of  the 
creditor; 

(b) if any suit or other legal proceeding has been instituted against any member for any debt or 
demand due, or claimed to be due, from the company, or from him in his character as a member, and 
notice  in  writing  of  the  institution  of  the  suit  or  other  legal  proceeding  having  been  served  on  the 
company by leaving the same at its principal place of business or by delivering it to the secretary, or 
some director, manager or principal officer of the company or by otherwise serving the same in such 
manner as the Tribunal may approve or direct, the company has not, within ten days after service of the 
notice,— 

(i) paid, secured or compounded for the debt or demand; 

(ii) procured the suit or other legal proceeding to be stayed; or 

(iii) indemnified the defendant to his satisfaction against the suit or other legal proceeding, and 

against all costs, damages and expenses to be incurred by him by reason of the same; 

(c) if execution or other process issued on a decree or order of any Court or Tribunal in favour of a 
creditor against the company, or any member thereof as such, or any person authorised to be sued as 
nominal defendant on behalf of the company, is returned unsatisfied in whole or in part; 

(d) if it is otherwise proved to the satisfaction of the Tribunal that the company is unable to pay its 

debts. 

Explanation.—For the purposes of this Part, the expression “unregistered company”— 

1. The proviso ins. by Act 1 of 2018, s. 76 (w.e.f. 15-8-2018). 

200 

 
                                                           
(a) shall not include— 

(i) a railway company incorporated under any Act of Parliament or other Indian law or any Act 

of Parliament of the United Kingdom; 

(ii) a company registered under this Act; or 

(iii) a company registered under any previous companies law and not being a company the 
registered office whereof was in Burma, Aden, Pakistan immediately before the separation of that 
country from India; and 

(b) save as aforesaid, shall include any partnership firm, limited liability partnership or society or 
co-operative society, association or company consisting of more than seven members at the time when 
the petition for winding up the partnership firm, limited liability partnership or society or co-operative 
society, association or company, as the case may be, is presented before the Tribunal. 

376.  Power  to  wind  up  foreign  companies,  although  dissolved.—  Where  a  body  corporate 
incorporated outside India which has been carrying on business in India, ceases to carry on business in 
India,  it  may  be  wound  up  as  an  unregistered  company  under  this  Part,  notwithstanding  that  the  body 
corporate has been dissolved or otherwise ceased to exist as such under or by virtue of the laws of the 
country under which it was incorporated. 

377. Provisions of Chapter cumulative.—(1) The provisions of this Part, with respect to unregistered 
companies shall be in addition to and not in derogation of, any provisions hereinbefore in this Act contained 
with respect to the winding up of companies by the Tribunal. 

(2)  The  Tribunal  or  Official  Liquidator  may  exercise  any  powers  or  do  any  act  in  the  case  of 
unregistered companies which might be exercised or done by the Tribunal or Official Liquidator in winding 
up of companies formed and registered under this Act: 

Provided that an unregistered company shall not, except in the event of its being wound up, be deemed 

to be a company under this Act, and then only to the extent provided by this Part. 

378.  Saving  and  construction  of  enactments  conferring  power  to  wind  up  partnership  firm, 
association or company, etc., in certain cases.—Nothing in this Part, shall affect the operation of any 
enactment which provides for any partnership firm, limited liability partnership or society or co-operative 
society, association or company being wound up, or being wound up as a company or as an unregistered 
company, under the Companies Act, 1956 (1 of 1956), or any Act repealed by that Act: 

Provided that references in any such enactment to any provision contained in the Companies Act, 1956 
(1 of 1956) or in any Act repealed by that Act shall be read as references to the corresponding provision, if 
any, contained in this Act. 

1[CHAPTER XXIA 

PRODUCER COMPANIES 

PART I 

PRELIMINARY 

378A. Definitions.— In this Chapter, unless the context otherwise requires,— 

(a)  “active  Member”  means  a  Member  who fulfils the  quantum  and  period  of  patronage  of the 

Producer Company as may be required by the articles; 

(b)  “Chief  Executive”  means  an  individual  appointed  as  such  under  sub-section  (1)  of  section 

378W; 

(c) “inter-State co-operative society” means a multi-State co-operative society as defined in clause 
(p) of section 3 of the Multi-State Co-operative Societies Act, 2002 (39 of 2002) and includes any co-

1. Ins. by Act 29 of 2020, s. 52 (w.e.f. 11-2-2021). 

201 

 
                                                           
operative society registered under any other law for the time being in force, which has, subsequent to 
its formation, extended any of its objects to more than one State by enlisting the participation of persons 
or  by  extending  any  of  its  activities  outside  the  State,  whether  directly  or  indirectly  or  through  an 
institution of which it is a constituent; 

(d) “limited return” means the maximum dividend as may be specified by the articles; 

(e) “Member” means a person or Producer Institution (whether incorporated or not) admitted as a 
Member of a Producer Company and who retains the qualifications necessary for continuance as such; 

(f) “mutual assistance principles” means the principles set out in sub-section (2) of section 378G; 

(g) “officer” includes any director or Chief Executive or Secretary or any person in accordance 
with whose directions or instructions part or whole of the business of the Producer Company is carried 
on; 

(h) “patronage” means the use of services offered by the Producer Company to its Members by 

participation in its business activities; 

(i) “patronage bonus” means payments made by a Producer Company out of its surplus income to 

the Members in proportion to their respective patronage; 

(j) “primary produce” means — 

(i)  produce  of  farmers,  arising  from  agriculture  (including  animal  husbandry,  horticulture, 
floriculture, pisciculture, viticulture, forestry, forest products, re-vegetation, bee raising and farming 
plantation products), or from any other primary activity or service which promotes the interest of the 
farmers or consumers; or 

(ii) produce of persons engaged in handloom, handicraft and other cottage industries; or 

(iii) any product resulting from any of the above activities, including by-products of such products; 

or 

(iv) any product resulting from an ancillary activity that may assist or promote any of the aforesaid 

activities or anything ancillary thereto; or 

(v) any activity which is intended to increase the production of anything referred to in sub-clauses 

(i) to (iv) or improve the quality thereof; 

(k) “producer” means any person engaged in any activity connected with or relatable to any primary 

produce; 

(l) “Producer Company” means a body corporate having objects or activities specified in section 
378B  and  registered  as  Producer  Company  under  this  Act  or  under  the  Companies  Act,  1956  
(1 of 1956); 

(m)  “Producer  Institution”  means  a  Producer  Company  or  any  other  institution  having  only 
producer  or  producers  or  Producer  Company  or  Producer  Companies  as  its  member  whether 
incorporated or not having any of the objects referred to in section 378B and which agrees to make use 
of the services of the Producer Company or Producer Companies as provided in its articles; 

(n) “withheld price” means part of the price due and payable for goods supplied by any Member to 
the Producer Company; and as withheld by the Producer Company for payment on a subsequent date. 

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PART II 

INCORPORATION OF PRODUCER COMPANIES AND OTHER MATTERS 

378B. Objects of Producer Company.—(1) The objects of the Producer Company shall relate to all 

or any of the following matters, namely:— 

(a) production, harvesting, procurement, grading, pooling, handling, marketing, selling, export of 

primary produce of the Members or import of goods or services for their benefit: 

Provided that the Producer Company  may carry on any of the activities specified in this clause 

either by itself or through other institution; 

(b) processing including preserving, drying, distilling, brewing, vinting, canning and packaging of 

produce of its Members; 

(c) manufacture, sale or supply of machinery, equipment or consumables mainly to its Members; 

(d) providing education on the mutual assistance principles to its Members and others; 

(e) rendering technical services, consultancy services, training, research and development and all 

other activities for the promotion of the interests of its Members; 

(f) generation, transmission and distribution of power, revitalisation of land and water resources, 

their use, conservation and communications relatable to primary produce; 

(g) insurance of producers or their primary produce; 

(h) promoting techniques of mutuality and mutual assistance; 

(i) welfare measures or facilities for the benefit of Members as may be decided by the Board; 

(j) any other activity, ancillary or incidental to any of the activities referred to in clauses (a) to (i) 
or other activities which may promote the principles of mutuality and mutual assistance amongst the 
Members in any other manner; 

(k) financing of procurement, processing, marketing or other activities specified in clauses (a) to 

(j) which include extending of credit facilities or any other financial services to its Members.’’. 

(2) Every Producer Company shall deal primarily with the produce of its active Members for carrying 

out any of its objects specified in this section. 

378C.  Formation  of Producer  Company  and  its  registration.—(1)  Any  ten  or  more  individuals, 
each of them being a producer or any two or more Producer Institutions, or a combination of ten or more 
individuals and Producer Institutions, desirous of forming a Producer Company having its objects specified 
in section 378B and otherwise complying with the requirements of this Chapter and the provisions of this 
Act in respect of registration, may form an incorporated company as a Producer Company under this Act. 

(2) If the Registrar is satisfied that all the requirements of this Act have been complied with in respect 
of registration and matters precedent and incidental thereto, he shall, within thirty days of the receipt of the 
documents required for registration, register the memorandum, the articles and other documents, if any, and 
issue a certificate of incorporation under this Act. 

(3) A Producer Company so formed shall have the liability of its Members limited by the memorandum 
to the amount, if any, unpaid on the shares respectively held by them and be termed a company limited by 
shares. 

(4) The Producer Company may reimburse to its promoters all other direct costs associated with the 
promotion and registration of the company including registration, legal fees, printing of a memorandum 

203 

 
and  articles  and  the  payment  thereof  shall  be  subject  to  the  approval  at  its  first  general  meeting  of  the 
Members. 

(5) On registration under sub-section (2), the Producer Company shall become a body corporate as if it 
is a private limited company to which the provisions contained in this Chapter apply, without, however, 
any limit to the number of Members thereof, and the Producer Company shall not, under any circumstance, 
whatsoever, become or be deemed to become a public limited company under this Act. 

378D. Membership and voting rights of Members of Producer Company.— (1)(a) In a case where 
the membership consists solely of individual Members, the voting rights shall be based on a single vote for 
every Member, irrespective of his shareholding or patronage of the Producer Company. 

(b) In a case where the membership consists of Producer Institutions only, the voting rights of such 
Producer Institutions shall be determined on the basis of their participation in the business of the Producer 
Company in the previous year, as may be specified by articles: 

Provided that during the first year of  registration of a Producer Company, the voting rights shall be 

determined on the basis of the shareholding by such Producer Institutions. 

(c) In a case where the membership consists of individuals and Producer Institutions, the voting rights 

shall be computed on the basis of a single vote for every Member. 

(2) The articles of any Producer Company may provide for the conditions, subject to which a Member 
may continue to retain his membership, and the manner in which voting rights shall be exercised by the 
Members. 

(3) Notwithstanding anything contained in sub-section (1) or sub-section (2), any Producer Company 
may, if so authorised by its articles, restrict the voting rights to active Members, in any special or general 
meeting. 

(4)  No  person,  who  has  any  business  interest  which  is  in  conflict  with  business  of  the  Producer 

Company, shall become a Member of that Company. 

(5) A Member, who acquires any business interest which is in conflict with the business of the Producer 
Company, shall cease to be a Member of that Company and be removed as a Member in accordance with 
the articles. 

378E.  Benefits  to  Members.—(1)  Subject  to  the  provisions  made  in  articles,  every  Member  shall 
initially receive only such value for the produce or products pooled and supplied as the Board of Producer 
Company may determine, and the withheld price may be disbursed later in cash or in kind or by allotment 
of equity shares, in proportion to the produce supplied to the Producer Company during the financial year 
to such extent and in such manner and subject to such conditions as may be decided by the Board. 

(2) Every Member shall, on the share capital contributed, receive only a limited return: 

Provided  that  every  such  Member  may  be  allotted  bonus  shares  in  accordance  with  the  provisions 

contained in section 378ZJ. 

(3) The surplus if any, remaining after making provision for payment of limited return and reserves 
referred to in section 378ZI, may be disbursed as patronage bonus, amongst the Members, in proportion to 
their participation in the business of the Producer Company, either in cash or by way of allotment of equity 
shares, or both, as may be decided by the Members at the general meeting. 

378F. Memorandum of Producer Company.—The memorandum of association of every Producer 

Company shall state— 

(a) the name of the company with "Producer Company Limited" as the last words of the name of 

such Company; 

(b) the State in which the registered office of the Producer Company is to situate; 

(c) the  main  objects  of the  Producer  Company  shall be  one  or  more  of the  objects specified  in 

section 378B; 

204 

 
(d) the names and addresses of the persons who have subscribed to the memorandum; 

(e) the amount of share capital with which the Producer Company is to be registered and division 

thereof into shares of a fixed amount; 

(f) the names, addresses and occupations of the subscribers being producers, who shall act as the 

first directors in accordance with sub-section (2) of section 378J; 

(g) that the liability of its members is limited; 

(h) against the subscriber's name, the number of shares each subscriber takes: 

Provided that no subscriber shall take less than one share; 

(i) that in case the objects of the Producer Company are not confined to one State, the States to 

whose territories the objects extend. 

378G. Articles of association.—(1) There shall be presented, for registration to the Registrar of the 
State to which the registered office of the Producer Company is, stated by the memorandum of association, 
to be situate— 

(a) memorandum of the Producer Company; 

(b) its articles duly signed by the subscribers to the memorandum. 

(2) The articles shall contain the following mutual assistance principles, namely:— 

(a) the membership shall be voluntary and available, to all eligible persons who, can participate or 
avail  of  the  facilities  or  services  of  the  Producer  Company,  and  are  willing  to  accept  the  duties  of 
membership; 

(b)  each  Member  shall,  save  as  otherwise  provided  in  this  Chapter,  have  only  a  single  vote 

irrespective of the shareholding; 

(c)  the  Producer  Company  shall  be  administered  by  a  Board  consisting  of  persons  elected  or 
appointed as directors in the manner consistent with the provisions of this Chapter and the Board shall 
be accountable to the Members; 

(d) particulars on limited return on share capital; 

(e) the surplus arising out of the operations of the Producer Company shall be distributed in an 

equitable manner by— 

(i) providing for the development of the business of the Producer Company; 

(ii) providing for common facilities; and 

(iii) distributing amongst the Members, as may be admissible in proportion to their respective 

participation in the business; 

(f) provision for the education of Members, employees and others, on the principles of mutuality 

and techniques of mutual assistance; 

(g)  the  Producer  Company  shall  actively  co-operate with  other  Producer  Companies  (and  other 
organisations following similar principles) at local, national or international level so as to best serve 
the interest of their Members and the communities it purports to serve. 

(3)  Without  prejudice  to  the  generality  of  the  foregoing  provisions  of  sub-sections  (1)  and  (2),  the 

articles shall contain the following provisions, namely:— 

(a) the qualifications for membership, the conditions for continuance or cancellation of membership 

and the terms, conditions and procedure for transfer of shares; 

(b) the manner of ascertaining the patronage and voting right based on patronage; 

(c) subject to the provisions contained in sub-section (1) of section 378N, the manner of constitution 
of the Board, its powers and duties, the minimum and maximum number of directors, manner of election 

205 

 
and appointment of directors and retirement by rotation, qualifications for being elected or continuance 
as such and the terms of office of the said directors, their powers and duties, conditions for election or 
co-option of directors, method of removal of directors and the filling up of vacancies on the Board, and 
the manner and the terms of appointment of the Chief Executive; 

(d) the election of the Chairman, term of office of directors and the Chairman, manner of voting at 
the general or special meetings of Members, procedure for voting, by directors at meetings of the Board, 
powers of the Chairman and the circumstances under which the Chairman may exercise a casting vote; 

(e) the circumstances under which, and the manner in which, the withheld price is to be determined 

and distributed; 

(f) the manner of disbursement of patronage bonus in cash or by issue of equity shares, or both; 

(g) the contribution to be shared and related matters referred to in sub-section (2) of section 378ZI; 

(h) the matters relating to issue of bonus shares out of general reserves as set out in section 378ZJ; 

(i) the basis and manner of allotment of equity shares of the Producer Company in lieu of the whole 

or part of the sale proceeds of produce or products supplied by the Members; 

(j) the amount of reserves, sources from which funds may be raised, limitation on raising of funds, 
restriction on the use of such funds and the extent of debt that may be contracted and the conditions 
thereof; 

(k) the credit, loans or advances which may be granted to a Member and the conditions for the grant 

of the same; 

(l) the right of any Member to obtain information relating to general business of the company; 

(m) the basis and manner of distribution and disposal of funds available after meeting liabilities in 

the event of dissolution or liquidation of the Producer Company; 

(n) the authorisation for division, amalgamation, merger, creation of subsidiaries and the entering 

into joint ventures and other matters connected therewith; 

(o)  laying  of  the  memorandum  and  articles  of  the  Producer  Company  before  a  special  general 

meeting to be held within ninety days of its registration; 

(p) any other provision, which the Members may, by special resolution recommend to be included 

in the articles. 

378H.  Amendment  of  memorandum.—(1)  A  Producer  Company  shall  not  alter  the  conditions 
contained in its memorandum except in the cases, by the mode and to the extent for which express provision 
is made in this Act. 

(2) A Producer Company may, by special resolution, not inconsistent with section 378B, alter its objects 

specified in its memorandum. 

(3) A copy of the amended memorandum, together with a copy of the special resolution duly certified 
by  two  directors,  shall  be  filed  with  the  Registrar  within  thirty  days  from  the  date  of  adoption  of  any 
resolution referred to in sub-section (2): 

Provided that in the case of transfer of the registered office of a Producer Company from the jurisdiction 
of one Registrar to another, certified copies of the special resolution certified by two directors shall be filed 
with both the Registrars within thirty days, and each Registrar shall record the same, and thereupon the 
Registrar from whose jurisdiction the office is transferred, shall forthwith forward to the other Registrar all 
documents relating to the Producer Company. 

(4) The alteration of the provisions of memorandum relating to the change of the place of its registered 
office from one State to another shall not take effect unless it is approved by the Central Government on an 
application in such form and manner as may be prescribed. 

206 

 
378-I. Amendment of articles.— (1) Any amendment of the articles shall be proposed by not less than 
two-thirds of the elected directors or by not less than one-third of the Members of the Producer Company, 
and adopted by the Members by a special resolution. 

(2) A copy of the amended articles together with the copy of the special resolution, both duly certified 

by two directors, shall be filed with the Registrar within fifteen days from the date of its adoption. 

378J.  Option  to  inter-State  co-operative  societies  to  become  Producer  Companies.—(1) 
Notwithstanding anything contained in sub-section (1) of section 378C, any inter-State co-operative society 
with objects not confined to one State may make an application to the Registrar for registration as Producer 
Company under this Chapter.  

(2) Every application under sub-section (1) shall be accompanied by— 

(a) a copy of the special resolution, of not less than two-thirds of total members of inter-State co-

operative society, for its incorporation as a Producer Company under this Act; 

(b) a statement showing— 

(i) names and addresses or the occupation of the directors and the Chief Executive, if any, by 

whatever name called, of such co-operative; and 

(ii) list of members of such inter-State co-operative society; 

(c) a statement indicating that the inter-State co-operative society is engaged in any one or more of 

the objects specified in section 378B; 

(d) a declaration by two or more directors of the inter-State co-operative  society certifying that 

particulars given in clauses (a) to (c) are correct. 

(3) When an inter-State co-operative society is registered as a Producer Company, the words “Producer 
Company Limited” shall form part of its name with any word or expression to show its identity preceding 
it. 

(4) On compliance with the requirements of sub-sections (1) to (3), the Registrar shall, within a period 
of thirty days of the receipt of application, certify under his hand that the inter-State co-operative society 
applying for registration is registered and thereby incorporated as a Producer Company under this Chapter. 

(5) A co-operative society formed by producers, by federation or union of co-operative societies of 
producers or co-operatives of producers, registered under any law for the time being in force which has 
extended its objects outside the State, either directly or through a union or federation of co-operatives of 
which it is a constituent, as the case may be, and any federation or unions of such co-operatives, which has 
so extended any of its objects or activities outside the State, shall be eligible to make an application under 
sub-section (1) and to obtain registration as a Producer Company under this Chapter. 

(6) The inter-State co-operative society shall, upon registration under sub-section (1), stand transformed 
into a Producer Company, and thereafter shall be governed by the provisions of this Chapter to the exclusion 
of the law by which it was earlier governed, save in so far as anything done or omitted to be done before 
its registration as a Producer Company, and notwithstanding anything contained in any other law for the 
time being in force, no person shall have any claim against the co-operative institution or the company by 
reason of such conversion or transformation. 

(7) Upon registration as a Producer Company, the Registrar of Companies who registers the company 
shall forthwith intimate the Registrar with whom the erstwhile inter-State co-operative society was earlier 
registered for deletion of the society from its register. 

378K.  Effect  of  incorporation  of  Producer  Company.—Every  shareholder  of  the  inter-State  co-
operative  society  immediately  before  the  date  of  registration  of  Producer  Company  (hereafter  in  this 
Chapter referred to as the date of transformation) shall be deemed to be registered on and from that date as 
a  shareholder  of  the  Producer  Company  to  the  extent  of  the  face  value  of  the  shares  held  by  such 
shareholder. 

207 

 
378L. Vesting of undertaking in Producer Company.—(1) All properties and assets, movable and 
immovable, of, or belonging to, the inter-State co-operative society as on the date of transformation, shall 
vest in the Producer Company. 

(2) All the rights, debts, liabilities, interests, privileges and obligations of the inter-State co-operative 
society  as  on  the  date  of  transformation  shall  stand  transferred  to,  and  be  the  rights,  debts,  liabilities, 
interests, privileges and obligations of, the Producer Company. 

(3) Without prejudice to the provisions contained in sub-section (2), all debts, liabilities and obligations 
incurred, all contracts entered into and all matters and things engaged to be done by, with or for, the society 
as on the date of transformation for or in connection with their purposes, shall be deemed to have been 
incurred, entered into, or engaged to be done by, with or for, the Producer Company. 

(4)  All  sums  of  money  due  to  the  inter-State  co-operative  society  immediately  before  the  date  of 

transformation, shall be deemed to be due to the Producer Company. 

(5) Every organisation, which was being managed immediately before the date of transformation by 
the inter-State co-operative society shall be managed by the Producer Company for such period, to such 
extent and in such manner as the circumstances may require. 

(6) Every organisation which was getting financial, managerial or technical assistance from the inter-
State  co-operative  society,  immediately  before  the  date  of  transformation,  may  continue  to  be  given 
financial, managerial or technical assistance, as the case may be, by the Producer Company, for such period, 
to such extent and in such manner as that company may deem fit. 

(7) The amount representing the capital of the erstwhile inter-State co-operative society shall form part 

of the capital of the Producer Company. 

(8) Any reference to the inter-State co-operative society in any law other than this Act or in any contract 

or other instrument, shall be deemed to be reference to the Producer Company. 

(9)  If,  on  the  date  of  transformation,  there  is  pending  any  suit,  arbitration,  appeal  or  other  legal 
proceeding of whatever nature by or against the inter-State co-operative society, the same shall not abate, 
be  discontinued  or  be  in  any  way  prejudicially  affected  by  reason  of  the  incorporation  of  the  Producer 
Company  under  section  378C  or  transformation  of  the  inter-State  co-operative  society  as  a  Producer 
Company under section 378J, as the case may be, but the suit, arbitration, appeal or other proceeding, may 
be continued, prosecuted and enforced by or against the Producer Company in the same manner and to the 
same extent as it would have, or may have been continued, prosecuted and enforced by or against the inter-
State co-operative society as if the provisions contained in this Chapter had not come into force. 

378M. Concession etc., to be deemed to have been granted to Producer Company.—With effect 
from  the  date  of  transformation,  all  fiscal  and  other  concessions,  licences,  benefits,  privileges  and 
exemptions granted to the inter-State co-operative society in connection with the affairs and business of the 
inter-State co-operative society under any law for the time being  in force shall be deemed to have been 
granted to the Producer Company. 

378N. Provisions in respect of officers and other employees of inter-State co-operative society.— 
(1) Notwithstanding anything contained in section 378-O, all the directors in the inter-State co-operative 
society before the incorporation of the Producer Company shall continue in office for a period of one year 
from the date of transformation and in accordance with the provisions of this Act. 

(2)  Every  officer or  other employee  of the  inter-State  co-operative society (except  a  director  of  the 
Board,  Chairman  or  Managing  Director)  serving  in  its  employment  immediately  before  the  date  of 
transformation shall, in so far as such officer or other employee is employed in connection with the inter-
State co-operative society which has vested in the Producer Company by virtue of this Act, become, as 
from the date of transformation, an officer or, as the case may be, other employee of the Producer Company 
and shall hold his office or service therein by the same tenure, at the same remuneration, upon the same 
terms and conditions, with the same obligations and with the same rights and privileges as to leave, leave 
travel  concession,  welfare  scheme,  medical  benefit  scheme,  insurance,  provident  fund,  other  funds, 
retirement, voluntary retirement, gratuity and other benefits as he would have held under the erstwhile inter-

208 

 
State co-operative society if its undertaking had not vested in the Producer Company and shall continue to 
do so as an officer or, as the case may be, other employee of the Producer Company. 

(3) Where an officer or other employee of the inter-State co-operative society opts under sub-section 
(2) not to be in employment or service of the Producer Company, such officer or other employee shall be 
deemed to have resigned. 

(4) Notwithstanding anything contained in the Industrial Disputes Act, 1947 (14 of 1947) or in any 
other law for the time being in force, the transfer of the services of any officer or other employee of the 
inter-State co-operative society to the Producer Company shall not entitle such officer or other employee 
to any compensation under this Act or under any other law for the time being in force and no such claim 
shall be entertained by any court, tribunal or other authority. 

(5)  The  officers  and  other  employees  who  have  retired  before  the  date  of  transformation  from  the 
service of the inter-State co-operative society and are entitled to any benefits, rights or privileges, shall be 
entitled to receive the same benefits, rights or privileges from the Producer Company. 

(6) The trusts of the provident fund or the gratuity fund of the inter-State co-operative society and any 
other bodies created for the welfare of officers or employees shall continue to discharge functions in the 
Producer Company as was being done hitherto in the inter-State co-operative society and any tax exemption 
granted to the provident fund or the gratuity fund would continue to be applied to the Producer Company. 

(7) Notwithstanding anything contained in this Act or in any other law for the time being in force or in 
the  regulations  of  the  inter-State  co-operative  society,  no  director  of  the  Board,  Chairman,  Managing 
Director or any other person entitled to manage the whole or substantial part of the business and affairs of 
the inter-State co-operative society shall be entitled to any compensation against the inter-State co-operative 
society or the Producer Company for the loss of office or for the premature termination of any contract of 
management entered into by him with the inter-State co-operative society. 

PART III 

MANAGEMENT OF PRODUCER COMPANY 

378-O. Number of directors.—Every Producer Company shall have at least five and not more than 

fifteen directors: 

Provided that in the case of an inter-State co-operative society incorporated as a Producer Company, 
such  company  may  have  more  than  fifteen  directors  for  a  period  of  one  year  from  the  date  of  its 
incorporation as a Producer Company. 

378P. Appointment of directors.— (1)Save as otherwise provided in section 378N, the Members who 
sign the memorandum and the articles may designate therein the Board of Directors, not less than five, who 
shall  govern the  affairs  of the  Producer  Company  until  the  directors  are elected in accordance  with the 
provisions of this section. 

(2) The election of directors shall be conducted within a period of ninety days of the registration of the 

Producer Company: 

Provided that in the case of an inter-State co-operative society which has been registered as a Producer 
Company  under  sub-section  (4)  of  section  378J  in  which  at  least five  directors  [including  the  directors 
continuing in office under sub-section (1) of section 378N] hold office as such on the date of registration 
of such company, the provisions of this sub-section shall have effect as if for the words "ninety days", the 
words "three hundred and sixty-five days" had been substituted. 

(3) Every person shall hold office of a director for a period not less than one year but not exceeding 

five years as may be specified in the articles. 

(4) Every director, who retires in accordance with the articles, shall be eligible for re-appointment as a 

director. 

(5)  Save  as  otherwise  provided  in  sub-section  (2),  the  directors  of  the  Board  shall  be  elected  or 

appointed by the Members in the annual general meeting. 

209 

 
(6) The Board may co-opt one or more expert directors or an additional director not exceeding one-
fifth of the total number of directors or appoint any other person as additional director for such period as 
the Board may deem fit: 

Provided that the expert directors shall not have the right to vote in the election of the Chairman but 

shall be eligible to be elected as Chairman, if so provided by its articles: 

Provided further that the maximum period, for which the expert director or the additional director holds 

office, shall not exceed such period as may be specified in the articles. 

378Q. Vacation of office by directors.— (1) The office of the director of a Producer Company shall 

become vacant if,— 

(a) he is convicted by a court of any offence involving moral turpitude and sentenced in respect 

thereof to imprisonment for not less than six months; 

(b)  the  Producer  Company,  in  which  he  is  a  director,  has  made  a  default  in  repayment  of  any 
advances or loans taken from any company or institution or any other person and such default continues 
for ninety days; 

(c) he has made a default in repayment of any advances or loans taken from the Producer Company 

in which he is a director; 

(d) the Producer Company, in which he is a director— 

(i) has not filed the annual accounts and annual return for any continuous three financial years; 

or 

(ii) has failed to, repay its deposit or withheld price or patronage bonus or interest thereon on 

due date, or pay dividend and such failure continues for one year or more; 

(e) default is made in holding election for the office of director, in the Producer Company in which 

he is a director, in accordance with the provisions of this Act and articles; 

(f) the annual general meeting or extraordinary general meeting of the Producer Company, in which 
he is a director, is not called in accordance with the provisions of this Act except due to natural calamity 
or such other reason. 

(2)  The  provisions  of  sub-section  (1)  shall,  as  far  as  may  be,  apply  to  the  director  of  a  Producer 

Institution which is a member of a Producer Company. 

378R. Powers and functions of Board.—(1) Subject to the provisions of this Act and articles, the 
Board of Directors of a Producer Company shall exercise all such powers and to do all such acts and things, 
as that Company is authorised so to do. 

(2)  In  particular  and  without  prejudice to the  generality  of the foregoing  powers,  such  powers  may 

include all or any of the following matters, namely:— 

(a) determination of the dividend payable; 

(b) determination of the quantum of withheld price and recommend patronage to be approved at 

general meeting; 

(c) admission of new Members; 

(d)  pursue  and  formulate  the  organisational  policy,  objectives,  establish  specific  long-term  and 

annual objectives, and approve corporate strategies and financial plans; 

(e) appointment of a Chief Executive and such other officers of the Producer Company, as may be 

specified in the articles; 

(f)  exercise  superintendence,  direction  and  control  over  Chief  Executive  and  other  officers 

appointed by it; 

210 

 
(g) cause proper books of account to be maintained; prepare annual accounts to be placed before 
the annual general meeting with the report of the auditor and the replies on qualifications, if any, made 
by the auditors; 

(h) acquisition or disposal of property of the Producer Company in its ordinary course of business; 

(i) investment of the funds of the Producer Company in the ordinary course of its business; 

(j)  sanction  any  loan  or  advance,  in  connection  with  the  business  activities  of  the  Producer 

Company to any Member, not being a director or his relative; 

(k)  take  such  other  measures  or  do  such  other  acts  as  may  be  required  in  the  discharge  of  its 

functions or exercise of its powers. 

(3) All the powers specified in sub-sections (1) and (2) shall be exercised by the Board, by means of 

resolution passed at its meeting on behalf of the Producer Company. 

Explanation.—For the removal of doubts, it is hereby declared that a director or a group of directors, 

who do not constitute the Board, shall not exercise any of the powers exercisable by it. 

378S. Matters to be transacted at general meeting.— The Board of Directors of a Producer Company 
shall  exercise  the  following  powers  on  behalf  of  that  Company,  and  it  shall  do  so  only  by  means  of 
resolutions passed at the annual general meeting of its Members, namely:— 

(a) approval of budget and adoption of annual accounts of the Producer Company; 

(b) approval of patronage bonus; 

(c) issue of bonus shares; 

(d) declaration of limited return and decision on the distribution of patronage; 

(e) specify the conditions and limits of loans that may be given by the Board to any director; and 

(f) approval of any transaction of the nature as is to be reserved in the articles for approval by the 

Members. 

378T. Liability of directors.— (1) When the directors vote for a resolution, or approve by any other 
means, anything done in contravention of the provisions of this Act or any other law for the time being in 
force or articles, they shall be jointly and severally liable to make good any loss or damage suffered by the 
Producer Company. 

(2) Without prejudice to the provisions contained in sub-section (1), the Producer Company shall have 

the right to recover from its director— 

(a)  where  such  director  has  made  any  profit  as  a  result  of  the  contravention  specified  in  

sub-section (1), an amount equal to the profit so made; 

(b) where the Producer Company incurred a loss or damage as a result of the contravention specified 

in sub-section (1), an amount equal to that loss or damage. 

(3) The liability imposed under this section shall be in addition to and not in derogation of a liability 

imposed on a director under this Act or any other law for the time being in force. 

378U. Committee of directors.—(1) The Board may constitute such number of committees as it may 

deem fit for the purpose of assisting the Board in the efficient discharge of its functions: 

Provided that the Board shall not delegate any of its powers or assign the powers of the Chief Executive, 

to any committee. 

(2) A committee constituted under sub-section (1) may, with the approval of the Board, co-opt such 

number of persons as it deems fit as members of the committee: 

211 

 
Provided that the Chief Executive appointed under section 378W or a director of the Producer Company 

shall be a member of such committee. 

(3) Every such committee shall function under the general superintendence, direction and control of the 

Board, for such duration, and in such manner as the Board may direct. 

(4)  The  fee  and  allowances  to  be  paid  to  the  members  of  the  committee  shall  be  such  as  may  be 

determined by the Board. 

(5) The minutes of each meeting of the committee shall be placed before the Board at its next meeting. 

378V.Meetings of Board and quorum.—(1) A meeting of the Board shall be held not less than once 

in every three months and at least four such meetings shall be held in every year. 

(2) Notice of every meeting of the Board of Directors shall be given in writing to every director for the 

time being in India, and at his usual address in India to every other director. 

(3) The Chief Executive shall give notice as aforesaid not less than seven days prior to the date of the 

meeting of the Board and if he fails to do so, he shall be liable to a penalty of five thousand rupees: 

Provided that a meeting of the Board may be called at shorter notice and the reasons thereof shall be 

recorded in writing by the Board. 

(4) The quorum for a meeting of the Board shall be one-third of the total strength of directors, subject 

to a minimum of three. 

(5) Save as provided in the articles, directors including the co-opted director, may be paid such fees 
and allowances for attendance at the meetings of the Board, as may be decided by the Members in the 
general meeting. 

378W. Chief Executive and his functions.— (1) Every Producer Company shall have a full time Chief 
Executive,  by  whatever  name  called,  to  be  appointed  by  the  Board  from  amongst  persons  other  than 
Members. 

(2) The Chief Executive shall be ex officio director of the Board and such director shall not retire by 

rotation. 

(3) Save as otherwise provided in articles, the qualifications, experience and the terms and conditions 

of service of the Chief Executive shall be such as may be determined by the Board. 

(4) The Chief Executive shall be entrusted with substantial powers of management as the Board may 

determine. 

(5) Without prejudice to the generality of sub-section (4), the Chief Executive may exercise the powers 

and discharge the functions, namely:— 

(a)  do  administrative  acts  of  a  routine  nature  including  managing  the  day-to-day  affairs  of  the 

Producer Company; 

(b) operate bank accounts or authorise any person, subject to the general or special approval of the 

Board in this behalf, to operate the bank account; 

(c) make arrangements for safe custody of cash and other assets of the Producer Company; 

(d) sign such documents as may be authorised by the Board, for and on behalf of the company; 

(e) maintain proper books of account; prepare annual accounts and audit thereof; place the audited 

accounts before the Board and in the annual general meeting of the Members; 

(f) furnish Members with periodic information to apprise them of the operation and functions of 

the Producer Company; 

(g) make appointments to posts in accordance with the powers delegated to him by the Board; 

(h) assist the Board in the formulation of goals, objectives, strategies, plans and policies; 

212 

 
(i)  advise  the  Board  with  respect  to  legal  and  regulatory  matters  concerning  the  proposed  and 

ongoing activities and take necessary action in respect thereof; 

(j) exercise the powers as may be necessary in the ordinary course of business; 

(k) discharge such other functions, and exercise such other powers, as may be delegated by the 

Board. 

(6)  The  Chief  Executive  shall  manage  the  affairs  of  the  Producer  Company  under  the  general 
superintendence, direction and control of the Board and be accountable for the performance of the Producer 
Company. 

378X. Secretary of Producer Company.— (1) Every Producer Company having an average annual 
turnover exceeding five crore rupees or such other amount as may be prescribed in each of three consecutive 
financial years shall have a whole-time secretary. 

(2) No individual shall be appointed as whole-time secretary unless he possesses membership of the 
Institute  of  Company  Secretaries  of  India  constituted  under  the  Company  Secretaries  Act,  1980  (56  of 
1980). 

(3) If a Producer Company fails to comply with the provisions of sub-section (1), the Company and 
every officer of the Company who is in default, shall be liable to a penalty of one hundred rupees for every 
day during which the default continues subject to a maximum of rupees one lakh: 

Provided that in any proceedings against a person in respect of a default under this sub-section, no 
penalty  shall  be  imposed  if  it  is  shown  that  all  reasonable  efforts  to  comply  with  the  provisions  of  
sub-section (1) were taken or that the financial position of the Company was such that it was beyond its 
capacity to engage a whole-time secretary. 

378Y. Quorum.— Unless the articles require a larger number, one-fourth of the total membership shall 

constitute the quorum at a general meeting. 

378Z. Voting rights.— Save as otherwise provided in sub-sections (1) and (3) of section 378D, every 
Member shall have one vote and in the case of equality of votes, the Chairman or the person presiding shall 
have a casting vote except in the case of election of the Chairman. 

PART IV 
GENERAL MEETINGS 

37ZA. Annual general meetings.—(1) Every Producer Company shall in each year, hold, in addition 
to any other meetings, a general meeting, as its annual general meeting and shall specify the meeting as 
such in the notices calling it, and not more than fifteen months shall elapse between the date of one annual 
general meeting of a Producer Company and that of the next: 

Provided that the Registrar may, for any special reason, permit extension of the time for holding any 
annual general meeting (not being the first annual general meeting) by a period not exceeding three months. 

(2) A Producer Company shall hold its first annual general meeting within a period of ninety days from 

the date of its incorporation. 

(3) The Members shall adopt the articles of the Producer Company and appoint directors of its Board 

in the annual general meeting. 

(4) The notice calling the annual general meeting shall be accompanied by the following documents, 

namely:— 

(a) the agenda of the annual general meeting; 

(b) the minutes of the previous annual general meeting or the extraordinary general meeting; 

(c) the names of candidates for election, if any, to the office of director including a statement of 

qualifications in respect of each candidate; 

(d)  the  audited  balance-sheet  and  profit  and  loss  accounts  of  the  Producer  Company  and  its 
subsidiary, if any, together with a report of the Board of Directors of such Company with respect to— 

213 

 
(i) the state of affairs of the Producer Company; 

(ii) the amount proposed to be carried to reserve; 

(iii) the amount to be paid as limited return on share capital; 

(iv) the amount proposed to be disbursed as patronage bonus; 

(v)  the  material  changes  and  commitments,  if  any,  affecting  the  financial  position  of  the 
Producer  Company  and  its  subsidiary,  which  have  occurred  in  between  the  date  of  the  annual 
accounts of the Producer Company to which the balance-sheet relates and the date of the report of 
the Board; 

(vi) any other matter of importance relating to energy conservation, environmental protection, 

expenditure or earnings in foreign exchanges; 

(vii) any other matter which is required to be, or may be, specified by the Board; 

(e) the text of the draft resolution for appointment of auditors; 

(f)  the  text  of  any  draft  resolution  proposing  amendment  to  the  memorandum  or  articles  to  be 

considered at the general meeting, alongwith the recommendations of the Board. 

(5) The Board of Directors shall, on the requisition made in writing, duly signed and setting out the 
matters for the consideration, made by one-third of the Members entitled to vote in any general meeting, 
proceed to call an extraordinary general meeting in accordance with the relevant provisions contained in 
Chapter VII. 

(6) Every annual general meeting shall be called, for a time during business hours, on a day that is not 
a public holiday and shall be held at the registered office of the Producer Company or at some other place 
within the city, town or village in which the registered office of the Company is situate. 

(7) A general meeting of the Producer Company shall be called by giving not less than fourteen days 

prior notice in writing. 

(8) The notice of the general meeting indicating the date, time and place of the meeting shall be sent to 

every Member and auditor of the Producer Company. 

(9) Unless the articles of the Producer Company provide for a larger number, one-fourth of the total 

number of members of the Producer Company shall be the quorum for its annual general meeting. 

(10) The proceedings of every annual general meeting alongwith the report of the Board of Directors, 
the audited balance-sheet and the profit and loss account shall be filed with the Registrar within sixty days 
of the date on which the annual general meeting is held, with an annual return alongwith the filing fees as 
applicable under the Act. 

(11) In the case where a Producer Company is formed by Producer Institutions, such Institutions shall 
be  represented  in  the  general  body  through  the  Chairman  or  the  Chief  Executive  thereof  who  shall  be 
competent to act on its behalf: 

Provided that a Producer Institution shall not be represented if such Institution is in default or failure 

referred to in clauses (d) to (f) of sub-section (1) of section 378Q. 

PART V 

SHARE CAPITAL AND MEMBERS RIGHTS 

378ZB. Share capital.—(1) The share capital of a Producer Company shall consist of equity shares 

only. 

(2) The shares held by a Member in a Producer Company, shall as far as may be, be in proportion to 

the patronage of that company. 

378ZC. Special user rights.— (1) The producers, who are active Members may, if so provided in the 
articles, have special rights and the Producer Company may issue appropriate instruments to them in respect 
of such special rights. 

214 

 
(2)  The  instruments  of  the  Producer  Company  issued  under  sub-section  (1)  shall,  after  obtaining 
approval of the Board in that behalf, be transferable to any other active Member of that Producer Company. 

Explanation.—For the purposes of this section, the expression “special right” means any right relating 
to supply of additional produce by the active Member or any other right relating to his produce which may 
be conferred upon him by the Board. 

378ZD.Transferability  of  shares  and  attendant  rights.—(1)  Save  as  otherwise  provided  in  

sub-sections (2) to (4), the shares of a Member of a Producer Company shall not be transferable. 

(2) A Member of a Producer Company may, after obtaining the previous approval of the Board, transfer 

the whole or part of his shares alongwith any special rights, to an active Member at par value. 

(3) Every Member shall, within three months of his becoming a Member in the Producer Company, 
nominate, in the manner specified in articles, a person to whom his shares in the Producer Company shall 
vest in the event of his death. 

(4) The nominee shall, on the death of the Member, become entitled to all the rights in the shares of the 
Producer Company and the Board of that Company shall transfer the shares of the deceased Member to his 
nominee: 

Provided that in a case where such nominee is not a producer, the Board shall direct the surrender of 
shares together with special rights, if any, to the Producer Company at par value or such other value as may 
be determined by the Board. 

(5) Where the Board of a Producer Company is satisfied that— 

(a) any Member has ceased to be a primary producer; or 

(b) any Member has failed to retain his qualifications to be a Member as specified in articles,          

the Board shall direct the surrender of shares together with special rights, if any, to the Producer Company 
at par value or such other value as may be determined by the Board: 

Provided that the Board shall not direct such surrender of shares unless the Member has been served 

with a written notice and given an opportunity of being heard. 

PART VI 
FINANCE, ACCOUNTS AND AUDIT 

378ZE. Books of account.— (1) Every Producer Company shall keep at its registered office proper 

books of account with respect to— 

(a) all sums of money received and expended by the Producer Company and the matters in 

respect of which the receipts and expenditure take place; 

(b) all sales and purchase of goods by the Producer Company; 

(c) the instruments of liability executed by or on behalf of the Producer Company; 

(d) the assets and liabilities of the Producer Company; 

(e) in case of a Producer Company engaged in production, processing and manufacturing, the 

particulars relating to utilisation of materials or labour or other items of costs. 

(2) The balance-sheet and profit and loss accounts of the Producer Company shall be prepared, as far 

as may be, in accordance with the provisions contained in section 129. 

215 

 
 
378ZF.Internal audit.— Every Producer Company shall have internal audit of its accounts carried 
out, at such interval and in such manner as may be specified in articles, by a chartered accountant as defined 
in clause (b) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949 (38 of 1949). 

378ZG.  Duties  of  auditor  under  this  Chapter.—Without  prejudice to the  provisions  contained in 
section 143, the auditor shall report on the following additional matters relating to the Producer Company,  
namely:— 

(a) the amount of debts due alongwith particulars of bad debts, if any; 

(b) the verification of cash balance and securities; 

(c) the details of assets and liabilities; 

(d) all transactions which appear to be contrary to the provisions of this Chapter; 

(e) the loans given by the Producer Company to the directors; 

(f) the donations or subscriptions given by the Producer Company; 

(g) any other matter as may be considered necessary by the auditor. 

378ZH. Donation or subscription by Producer Company.—A Producer Company may, by special 

resolution, make donation or subscription to any institution or individual for the purposes of— 

(a)  promoting  the  social  and  economic  welfare  of  Producer  Members  or  producers  or  general 

public; or 

(b) promoting the mutual assistance principles: 

Provided that the aggregate amount of all such donations and subscriptions in any financial year 
shall  not  exceed  three  per  cent.  of  the  net  profit  of  the  Producer  Company  in  the  financial  year 
immediately preceding the financial year in which the donation or subscription was made: 

Provided further that no Producer Company shall make directly or indirectly to any political party 
or  for  any  political  purpose  to  any  person  any  contribution  or  subscription  or  make  available  any 
facilities including personnel or material. 

378Z-I. General and other reserves.—(1) Every Producer Company shall maintain a general reserve 

in every financial year, in addition to any reserve maintained by it as may be specified in articles. 

(2) In a case where the Producer Company does not have sufficient funds in any financial year for 
transfer to maintain the reserves as may be specified in articles, the contribution to the reserve shall be 
shared amongst the Members in proportion to their patronage in the business of that Company in that year. 

378ZJ. Issue of bonus Shares.— Any Producer Company may, upon recommendation of the Board 
and  passing  of  resolution  in  the  general  meeting,  issue  bonus  shares  by  capitalisation  of  amounts  from 
general reserves referred to in section 378Z-I in proportion to the shares held by the Members on the date 
of the issue of such shares. 

PART VII 

LOANS TO MEMBERS AND INVESTMENTS 

378ZK. Loan, etc., to Members.— The Board may, subject to the provisions made in articles, provide 

financial assistance to the Members of the Producer Company by way of— 

(a) credit facility, to any Member, in connection with the business of the Producer Company, for a 

period not exceeding six months; 

(b) loans and advances, against security specified in articles to any Member, repayable within a 
period exceeding three months but not exceeding seven years from the date of disbursement of such 
loan or advances: 

216 

 
Provided that any loan or advance to any director or his relative shall be granted only after the approval 

by the Members in general meeting. 

378ZL. Investment in other companies, formation of subsidiaries etc.— (1) The general reserves 
of any Producer Company shall be invested to secure the highest returns available from approved securities, 
fixed deposits, units, bonds issued by the Government or co-operative or scheduled bank or in such other 
mode as may be prescribed. 

(2) Any Producer Company may, for promotion of its objectives acquire the shares of another Producer 

Company. 

(3) Any Producer Company may subscribe to the share capital of, or enter into any agreement or other 
arrangement, whether by way of formation of its subsidiary company, joint venture or in any other manner 
with any body corporate, for the purpose of promoting the objects of the Producer Company by special 
resolution in this behalf. 

(4) Any Producer Company, either by itself or together with its subsidiaries, may invest, by way of 
subscription,  purchase  or  otherwise,  shares  in  any  other  company,  other  than  a  Producer  Company, 
specified  under  sub-section  (2),  or  subscription  of  capital  under  sub-section  (3),  for  an  amount  not 
exceeding thirty per cent. of the aggregate of its paid-up capital and free reserves: 

Provided that a Producer Company may, by special resolution passed in its general meeting and with 

prior approval of the Central Government, invest in excess of the limits specified in this section. 

(5) All investments by a Producer Company may be made if such investments are consistent with the 

objects of the Producer Company. 

(6)  The  Board  of  a  Producer  Company  may,  with  the  previous  approval  of  Members  by  a  special 

resolution, dispose of any of its investments referred to in sub-sections (3) and (4). 

(7) Every Producer Company shall maintain a register containing particulars of all the investments, 
showing the names of the companies in which shares have been acquired, number and value of shares; the 
date of acquisition; and the manner and price at which any of the shares have been subsequently disposed 
of. 

(8)  The  register  referred  to  in  sub-section  (7)  shall  be  kept  at  the  registered  office  of  the  Producer 

Company and the same shall be open to inspection by any Member who may take extracts therefrom. 

PART VIII 

PENALTIES 

378ZM. Penalty for contravention.—(1) If any person, other than a Producer Company registered 
under  this  Chapter,  carries  on  business  under  any  name  which  contains  the  words  "Producer  Company 
Limited", he shall be punishable with fine which may extend to ten thousand rupees for every day during 
which such name has been used by him. 

(2) If a director or an officer of a Producer Company, who wilfully fails to furnish any information 
relating to the affairs of the Producer Company required by a Member or a person duly authorised in this 
behalf,  he  shall  be  liable  to  imprisonment  for  a  term  which  may  extend  to  six  months  and  with  fine 
equivalent to five per cent. of the turnover of that Company during the preceding financial year. 

(3) If a director or officer of a Producer Company— 

(a)  fails  to  hand  over  the  custody  of  books  of  account  and  other  documents  or  property  in  his 

custody to the Producer Company of which he is a director or officer; or 

(b) fails to convene annual general meeting or other general meetings,  

he shall be punishable with fine which may extend to one lakh rupees, and in the case of a continuing default 
or failure, with an additional fine which may extend to ten thousand rupees for every day during which such 
default or failure continues. 

217 

 
 
 
PART IX 

AMALGAMATION, MERGER OR DIVISION 

378ZN.  Amalgamation  merger  or  division,  etc.  to  form  new  Producer  Companies.—(1)  A 

Producer Company may, by a resolution passed at its general meeting,— 

(a) decide to transfer its assets and liabilities, in whole or in part, to any other Producer Company, 
which  agrees  to  such  transfer  by  a  resolution  passed  at  its  general  meeting,  for  any  of  the  objects 
specified in section 378B; 

(b) divide itself into two or more new Producer Companies. 

(2)  Any  two  or  more  Producer  Companies  may,  by  a  resolution  passed  at  any  general  or  special 

meetings of its Members, decide to— 

(a) amalgamate and form a new Producer Company; or 

(b) merge one Producer Company (hereafter in this Chapter referred to as "merging company") 

with another Producer Company (hereafter in this Chapter referred to as "merged company"). 

(3) Every resolution of a Producer Company under this section shall be passed at its general meeting 
by a majority of total Members, with right of vote not less than two-thirds of its Members present and voting 
and  such  resolution  shall  contain  all  particulars  of  the  transfer  of  assets  and  liabilities,  or  division, 
amalgamation, or merger, as the case may be. 

(4) Before passing a resolution under this section, the Producer Company shall give notice thereof in 
writing together with a copy of the proposed resolution to all the Members and creditors who may give 
their consent. 

(5) Notwithstanding anything contained in articles or in any contract to the contrary, any Member, or 
any creditor not consenting to the resolution shall, during the period of one month of the date of service of 
the notice on him, have the option,— 

(a) in the case of any such Member, to transfer his shares with the approval of the Board to any 

active Member thereby ceasing to continue as a Member of that Company; or 

(b) in the case of a creditor, to withdraw his deposit or loan or advance, as the case may be. 

(6) Any Member or creditor, who does not exercise his option within the period specified in sub-section 

(5), shall be deemed to have consented to the resolution. 

(7) A resolution passed by a Producer Company under this section shall not take effect until the expiry 
of one month or until the assent thereto of all the Members and creditors has been obtained, whichever is 
earlier. 

(8) The resolution referred to in this section shall provide for— 

(a) the regulation of conduct of the affairs of the Producer Company in future; 

(b) the purchase of shares or interest of any Members of the Producer Company by other Members 

or by the Producer Company; 

(c) the consequent  reduction  of  its share  capital,  in case  of  purchase  of  shares  of  one  Producer 

Company by another Producer Company; 

(d) termination, setting aside or modification of any agreement, howsoever arrived between the 
company on the one hand and the directors, secretaries and manager on the other hand, apart from such 
terms and conditions as may, in the opinion of the majority of shareholders, be just and equitable in the 
circumstances of the case; 

218 

 
(e) termination, setting aside or modification of any agreement between the Producer Company and 

any person not referred to in clause (d): 

Provided that  no  such  agreement  shall  be terminated,  set aside  or  modified  except  after  giving  due 

notice to the party concerned: 

Provided further that no such agreement shall be modified except after obtaining the consent of the 

party concerned; 

(f) the setting aside of any transfer, delivery of goods, payment, execution or other act relating to 
property, made or done by or against the Producer Company within three months before the date of 
passing  of  the  resolution,  which  would  if  made  or  done  against  any  individual,  be  deemed  in  his 
insolvency to be a fraudulent preference; 

(g) the transfer to the merged company of the whole or any part of the undertaking, property or 

liability of the Producer Company; 

(h) the allotment or appropriation by the merged company of any shares, debentures, policies, or 

other like interests in the merged company; 

(i) the  continuation  by  or  against the  merged  company  of  any  legal  proceedings  pending  by  or 

against any Producer Company; 

(j) the dissolution, without winding up, of any Producer Company; 

(k) the provision to be made for the Members or creditors who make dissent; 

(l) the taxes, if any, to be paid by the Producer Company; 

(m)  such incidental,  consequential  and  supplemental matters as are  necessary  to  secure that the 

division, amalgamation or merger shall be fully and effectively carried out. 

(9) When a resolution passed by a Producer Company under this section takes effect, the resolution 

shall be a sufficient conveyance to vest the assets and liabilities in the transferee. 

(10) The Producer Company shall make arrangements for meeting in full or otherwise satisfying all 
claims of the Members and the creditors who exercise the option, within the period specified in sub-section 
(4), not to continue as the Member or creditor, as the case may be. 

(11) Where the whole of the assets and liabilities of a Producer Company are transferred to another 
Producer Company in accordance with the provisions of sub-section (9), or where there is merger under 
sub-section (2), the registration of the first mentioned Company or the merging company, as the case may 
be, shall stand cancelled and that Company shall be deemed to have been dissolved and shall cease to exist 
forthwith as a corporate body. 

(12)  Where  two  or  more  Producer  Companies  are  amalgamated  into  a  new  Producer  Company  in 
accordance with the provisions of sub-section (2) and the Producer Company so formed is duly registered 
by the Registrar, the registration of each of the amalgamating companies shall stand cancelled forthwith on 
such registration and each of the Companies shall thereupon cease to exist as a corporate body. 

(13) Where a Producer Company divides itself into two or more Producer Companies in accordance 
with  the  provisions  of  clause  (b)  of  sub-section  (1)  and  the  new  Producer  Companies  are  registered  in 
accordance with the provisions of this Chapter, the registration of the erstwhile Producer Company shall 
stand cancelled forthwith and that Company shall be deemed to have been dissolved and cease to exist as a 
corporate body. 

(14) The amalgamation, merger or division of companies under the foregoing sub-sections shall not in 
any manner whatsoever affect the pre-existing rights or obligations and any legal proceedings that might 

219 

 
have been continued or commenced by or against any erstwhile company before the amalgamation, merger 
or division, may be continued or commenced by, or against, the concerned resulting company, or merged 
company, as the case may be. 

(15)  The  Registrar  shall  strike  off  the  names  of  every  Producer  Company  deemed  to  have  been 

dissolved under sub-sections (11) to (14). 

(16) Any member or creditor or employee aggrieved by the transfer of assets, division, amalgamation 

or merger may, within thirty days of the passing of the resolution, prefer an appeal to the Tribunal. 

(17) The Tribunal shall, after giving a reasonable opportunity to the person concerned, pass such orders 

thereon as it may deem fit. 

(18)  Where  an  appeal  has  been  filed  under  sub-section  (16),  the  transfer  of  assets,  division, 

amalgamation or merger of the Producer Company shall be subject to the decision of the Tribunal. 

PART X 

RESOLUTION OF DISPUTES 

378Z-O. Disputes.—(1) Where any dispute relating to the formation, management or business of a 

Producer Company arises— 

(a)  amongst  Members,  former  Members  or  persons  claiming  to  be  Members  or  nominees  of 

deceased Members; or 

(b)  between  a  Member,  former  Member  or  a  person  claiming  to  be  a  Member,  or  nominee  of 
deceased Member and the Producer Company, its Board of Directors, office-bearers, or liquidator, past 
or present; or 

(c)  between  the  Producer  Company  or  its  Board,  and  any  director,  office-bearer  or  any  former 
director, or the nominee, heir or legal representative of any deceased director of the Producer Company, 

such  dispute  shall  be  settled  by  conciliation  or  by  arbitration  as  provided  under  the  Arbitration  and 
Conciliation  Act,  1996  (26  of  1996)  as  if  the  parties  to  the  dispute  have  consented  in  writing  for 
determination of such disputes by conciliation or by arbitration and the provisions of the said Act shall 
apply accordingly. 

Explanation.—For the purposes of this section, a dispute shall include— 

(a) a claim for any debt or other amount due; 

(b) a claim by surety against the principal debtor, where the Producer Company has recovered from 
the surety amount in respect of any debtor or other amount due to it from the principal debtor as a result 
of the default of the principal debtor whether such debt or amount due be admitted or not; 

(c) a claim by Producer Company against a Member for failure to supply produce as required of 

him; 

(d) a claim by a Member against the Producer Company for not taking goods supplied by him. 

(2)  If  any  question  arises  whether  the  dispute  relates  to  formation,  management  or  business  of  the 

Producer Company, the question shall be referred to the arbitrator, whose decision thereon shall be final. 

220 

 
 
 
PART XI 

MISCELLANEOUS PROVISIONS 

378ZP. Strike off name of Producer Company.— (1) Where a Producer Company fails to commence 
business  within  one  year  of  its  registration  or  ceases  to  transact  business  with  the  Members  or  if  the 
Registrar is satisfied, after making such inquiry as he thinks fit, that the Producer Company is no longer 
carrying on any of its objects specified in section 378B, he shall make an order striking off the name of the 
Producer Company, which shall thereupon cease to exist forthwith: 

Provided that no such order cancelling the registration as aforesaid shall be passed until a notice to 
show cause has been given by the Registrar to the Producer Company with a copy to all its directors on the 
proposed action and reasonable opportunity to represent its case has been given. 

(2) Where the Registrar has reasonable cause to believe that a Producer Company is not maintaining 
any of the mutual assistance principles specified, he shall strike its name off the register in accordance with 
the provisions contained in section 248. 

(3) Any Member of a Producer Company, who is aggrieved by an order made under sub-section (1), 

may appeal to the Tribunal within sixty days of the order. 

(4) Where an appeal is filed under sub-section (3), the order of striking off the name shall not take effect 

until the appeal is disposed of. 

378ZQ. Provisions of this Chapter to override other laws.— The provisions of this Chapter shall 
have effect notwithstanding anything inconsistent therewith contained in this Act or any other law for the 
time being in force or any instrument having effect by  virtue of any such law; but the provisions of any 
such Act or law or instrument in so far as the same are not varied by, or are inconsistent with, the provisions 
of this Chapter shall apply to the Producer Company. 

378ZR. Application of provisions relating to private companies.— All the limitations, restrictions 
and provisions of this Act, other than those specified in this Chapter, applicable to a private company, shall, 
as far as may be, apply to a Producer Company, as if it is a private limited company under this Act in so far 
as they are not in conflict with the provisions of this Chapter. 

PART XII 

RE-CONVERSION OF PRODUCER COMPANY TO INTER-STATE CO-OPERATIVE SOCIETY 

378ZS.  Re-conversion  of  Producer  Company  to  inter-State  co-operative  society.—(1)  Any 
Producer Company, being an erstwhile inter-State co-operative society, formed and registered under this 
Chapter, may make an application— 

(a)  after  passing  a  resolution  in  the  general  meeting  by  not  less  than  twothirds  of  its  Members 

present and voting; or 

(b) on request by its creditors representing three-fourths value of its total creditors, to the Tribunal 

for its re-conversion to the inter-State co-operative society. 

(2) The Tribunal shall, on the application made under sub-section (1), direct  holding meeting of its 

Members or such creditors, as the case may be, to be conducted in such manner as it may direct. 

(3) If a majority in number representing three-fourths in value of the creditors, or Members, as the case 
may be, present and voting in person at the meeting conducted in pursuance of the directions of the Tribunal 
under sub-section (2), agree for re-conversion, if sanctioned by the Tribunal, be binding on all the Members 
and all the creditors, as the case may be, and also on the company which is being converted: 

Provided that no order sanctioning re-conversion shall be made by the Tribunal unless the Tribunal is 
satisfied that the company or any other person by whom an application has been made under sub-section 
(1) has disclosed to the Tribunal, by affidavit or otherwise, all material facts relating to the company, such 
as  the  latest  financial  position  of  the  company,  the  latest  report  of  the  auditor  on  the  accounts  of  the 
company, the pendency of any investigation proceedings in relation to the company under Chapter XIV, 
and the like. 

221 

 
(4) An order made by the Tribunal under sub-section (3) shall have no effect until a certified copy of 

the order has been filed with the Registrar. 

(5) A copy of every such order shall be annexed to every copy of the memorandum of the company 
issued after the certified copy of the order has been filed as aforesaid, or in the case of a company not having 
a memorandum, to every copy so issued of the instrument constituting or defining the constitution of the 
company. 

(6) If default is made in complying with sub-section (4), the company, and every officer of the company 
who is in default, shall be punishable with fine which may extend to one hundred rupees, for each copy in 
respect of which default is made. 

(7) The Tribunal may, at any time after an application has been made to it under this section, stay the 
commencement or continuation of any suit or proceeding against the company on such terms as the Tribunal 
thinks fit, until the application is finally disposed of. 

(8) Every Producer Company, which has been sanctioned re-conversion by the Tribunal, shall make an 
application under the Multi-State Co-operative Societies Act, 2002 (39 of 2002) or any other law for the 
time being in force for its registration as multi-State co-operative society or co-operative society, as the 
case may be, within six months of sanction by the Tribunal and file a report thereof to the Tribunal and the 
Registrar of Companies and to the Registrar of the Co-operative Societies under which it has been registered 
as a multi-State co-operative society or co-operative society, as the case may be. 

378ZT.  Power  to  modify  Act  in  its  application  to  Producer  Companies.—(1)  The  Central 
Government may, by notification, direct that any of the provisions of this Act (other than those contained 
in this Chapter) specified in the said notification— 

(a) shall not apply to the Producer Companies or any class or category thereof; or 

(b) shall apply to the Producer Companies or any class or category thereof with such exception or 

adaptation as may be specified in the notification. 

(2) A copy of every notification proposed to be issued under sub-section (1), shall be laid in draft before 
each House of Parliament, while it is in session, for a total period of thirty days which may be comprised 
in one session or in two or more successive sessions, and if, before the expiry of the session immediately 
following the session or the successive sessions aforesaid, both Houses agree in disapproving the issue of 
the notification or both Houses agree in making any modification in the notification, the notification shall 
not be issued or, as the case may be, shall be issued only in such modified form as may be agreed upon by 
both the Houses. 

378ZU. Power to make rules.—The Central Government may make rules for carrying out the purposes 

of this Chapter.] 

CHAPTER XXII 

COMPANIES INCORPORATED OUTSIDE INDIA 

379. Application of Act to foreign companies.—1[(1) Sections 380 to 386 (both inclusive) and sections 

392 and 393 shall apply to all foreign companies: 

2* 

* 

* 

* 

* 

3[(2)] Where not less than fifty per cent. of the paid-up share capital, whether equity or preference or 
partly equity and partly preference, of a foreign company is held by one or more citizens of India or by one 
or more companies or bodies corporate incorporated in India, or by one or more citizens of India and one 
or  more  companies  or  bodies  corporate  incorporated  in  India,  whether  singly  or  in  the  aggregate,  such 
company shall comply with the provisions of this Chapter and such other provisions of this Act as may be 
prescribed with regard to the business carried on by it in India as if it were a company incorporated in India. 

1. Ins. by Act 1 of 2018, s. 77 (w.e.f. 9-2-2018). 
2. The Proviso omitted by Act 29 of 2020, s. 53 (w.e.f. 22-1-2021). 
3. Section 379 renumbered as sub-section (2) thereof by s. 77, ibid. (w.e.f. 9-2-2018). 

222 

 
 
 
 
 
 
 
 
 
                                                           
380.  Documents,  etc.,  to  be  delivered  to  Registrar  by  foreign  companies.—(1)  Every  foreign 
company  shall,  within  thirty  days  of  the  establishment  of  its  place  of  business  in  India,  deliver  to  the 
Registrar for registration— 

(a) a certified copy of the charter, statutes or memorandum and articles, of the company or other 
instrument constituting or defining the constitution of the company and, if the instrument is not in the 
English language, a certified translation thereof in the English language; 

(b) the full address of the registered or principal office of the company; 

(c)  a  list  of  the  directors  and  secretary  of  the  company  containing  such  particulars  as  may  be 

prescribed; 

(d)  the  name  and  address or  the  names  and  addresses  of  one  or  more  persons resident in  India 
authorised to accept on behalf of the company service of process and any notices or other documents 
required to be served on the company; 

(e) the full address of the office of the company in India which is deemed to be its principal place 

of business in India; 

(f) particulars of opening and closing of a place of business in India on earlier occasion or occasions; 

(g) declaration that none of the directors of the company or the authorised representative in India 
has ever been convicted or debarred from formation of companies and management in India or abroad; 
and 

(h) any other information as may be prescribed. 

(2) Every foreign company existing at the commencement of this Act shall, if it has not delivered to the 
Registrar before such commencement, the documents and particulars specified in sub-section (1) of section 
592  of  the  Companies  Act,  1956  (1  of  1956),  continue  to  be  subject  to  the  obligation  to  deliver  those 
documents and particulars in accordance with that Act. 

(3)  Where  any  alteration  is  made  or  occurs  in  the  documents  delivered  to  the  Registrar  under  this 
section,  the  foreign  company  shall,  within  thirty  days  of  such  alteration,  deliver  to  the  Registrar  for 
registration, a return containing the particulars of the alteration in the prescribed form. 

381. Accounts of foreign company.—(1) Every foreign company shall, in every calendar year,— 

(a) make out a balance sheet and profit and loss account in such form, containing such particulars 

and including or having annexed or attached thereto such documents as may be prescribed; and 

(b) deliver a copy of those documents to the Registrar: 

Provided  that  the  Central  Government  may,  by  notification,  direct  that,  in  the  case  of  any  foreign 
company or class of foreign companies, the requirements of clause (a) shall not apply, or shall apply subject 
to such exceptions and modifications as may be specified in that notification. 

(2) If any such document as is mentioned in sub-section (1) is not in the English language, there shall 

be annexed to it a certified translation thereof in the English language. 

(3) Every foreign company shall send to the Registrar along with the documents required to be delivered 
to him under sub-section (1), a copy of a list in the prescribed form of all places of business established by 
the company in India as at the date with reference to which the balance sheet referred to in sub-section (1) 
is made out. 

382. Display of name, etc., of foreign company.—Every foreign company shall— 

(a) conspicuously exhibit on the outside of every office or place where it carries on business in 
India, the name of the company and the country in which it is incorporated, in letters easily legible in 
English characters, and also in the characters of the language or one of the languages in general use in 
the locality in which the office or place is situate; 

223 

 
(b) cause the name of the company and of the country in which the company is incorporated, to be 
stated in legible English characters in all business letters, billheads and letter paper, and in all notices, 
and other official publications of the company; and 

(c) if the liability of the members of the company is limited, cause notice of that fact— 

(i)  to  be  stated  in  every  such  prospectus  issued  and  in  all  business  letters,  bill-heads,  letter 
paper, notices, advertisements and other official publications of the company, in legible English 
characters; and 

(ii) to be conspicuously exhibited on the outside of every office or place where it carries on 
business in India, in legible English characters and also in  legible characters of the language or 
one of the languages in general use in the locality in which the office or place is situate. 

383. Service on foreign company.—Any process, notice, or other document required to be served on 
a foreign company shall be deemed to be sufficiently served, if addressed to any person whose name and 
address have been delivered to the Registrar under section 380 and left at, or sent by post to, the address 
which has been so delivered to the Registrar or by electronic mode. 

384. Debentures, annual return, registration of charges, books of account and their inspection.—

(1) The provisions of section 71 shall apply mutatis mutandis to a foreign company. 

(2) The provisions of section 92 1[and section 135] shall, subject to such exceptions, modifications and 
adaptations as may be made therein by rules made under this Act, apply to a foreign company as they apply 
to a company incorporated in India. 

(3) The provisions of section 128 shall apply to a foreign company to the extent of requiring it to keep 
at its principal place of business in India, the books of account referred to in that section, with respect to 
monies received and spent, sales and purchases made, and assets and liabilities, in the course of or in relation 
to its business in India. 

(4)  The  provisions  of  Chapter  VI  shall  apply  mutatis  mutandis  to  charges  on  properties  which  are 

created or acquired by any foreign company. 

(5) The provisions of Chapter XIV shall apply  mutatis mutandis to the Indian business of a foreign 

company as they apply to a company incorporated in India. 

385.  Fee  for  registration  of  documents.—There  shall  be  paid  to  the  Registrar  for  registering  any 
document required by the provisions of this Chapter to be registered by him, such fee, as may be prescribed. 

386. Interpretation.—For the purposes of the foregoing provisions of this Chapter,— 

(a) the expression “certified” means certified in the prescribed manner to be a true copy or a correct 

translation; 

(b) the expression “director”, in relation to a foreign company, includes any person in accordance 
with whose directions or instructions the Board of Directors of the company is accustomed to act; and 

(c) the expression “place of business” includes a share transfer or registration office. 

387.  Dating  of  prospectus  and  particulars  to  be  contained  therein.—(1)  No  person  shall  issue, 
circulate or distribute in India any prospectus offering to subscribe for securities of a company incorporated 
or to be incorporated outside India, whether the company has or has not established, or when formed will 
or will not establish, a place of business in India, unless the prospectus is dated and signed, and— 

(a) contains particulars with respect to the following matters, namely:— 

(i) the instrument constituting or defining the constitution of the company; 

(ii)  the  enactments  or  provisions  by  or  under  which  the  incorporation  of  the  company  was 

effected; 

1. Ins. by Act 1 of 2018, s. 78 (w.e.f. 9-2-2018). 

224 

 
                                                           
(iii) address in India where the said instrument, enactments or provisions, or copies thereof, 
and  if  the  same  are  not  in  the  English  language,  a  certified  translation  thereof  in  the  English 
language can be inspected; 

(iv) the date on which and the country in which the company would be or was incorporated; 

and 

(v) whether the company has established a place of business in India and, if so, the address of 

its principal office in India; and 

(b) states the matters specified under section 26: 

Provided that sub-clauses (i), (ii) and (iii) of clause (a) of this sub-section shall not apply in the case of 
a  prospectus  issued  more  than  two  years  after  the  date  at  which  the  company  is  entitled  to  commence 
business. 

(2)  Any  condition  requiring  or  binding  an  applicant  for  securities  to  waive  compliance  with  any 
requirement imposed by virtue of sub-section (1), or purporting to impute him with notice of any contract, 
documents or matter not specifically referred to in the prospectus, shall be void. 

(3) No person shall issue to any person in India a form of application for securities of such a company 
or intended company as is mentioned in sub-section (1), unless the form is issued with a prospectus which 
complies with the provisions of this Chapter and such issue does not contravene the provisions of section 
388: 

Provided that this sub-section shall not apply if it is shown that the form of application was issued in 
connection with a bona fide invitation to a person to enter into an underwriting agreement with respect to 
securities. 

(4) This section — 

(a)  shall  not  apply  to  the  issue  to  existing  members  or  debenture  holders  of  a  company  of  a 
prospectus  or  form  of  application  relating  to  securities  of  the  company,  whether  an  applicant  for 
securities will or will not have the right to renounce in favour of other persons; and 

(b) except in so far as it requires a prospectus to be dated, to the issue of a prospectus relating to 
securities which are or are to be in all respects uniform with securities previously issued and for the 
time being dealt in or quoted on a recognised stock exchange, 

but, subject as aforesaid, this section shall apply to a prospectus or form of application whether issued on 
or with reference to the formation of a company or subsequently. 

(5) Nothing in this section shall limit or diminish any liability which any person may incur under any 

law for the time being in force in India or under this Act apart from this section. 

388.  Provisions  as  to  expert’s  consent  and  allotment.—(1)  No  person  shall  issue,  circulate  or 
distribute in India any prospectus offering for subscription in securities of a company incorporated or to be 
incorporated outside India, whether the company has or has not been established, or when formed will or 
will not establish, a place of business in India,— 

(a) if, where the prospectus includes a statement purporting to be made by an expert, he has not 
given, or has before delivery of the prospectus for registration withdrawn, his written consent to the 
issue of the prospectus with the statement included in the form and context in which it is included, or 
there does not appear in the prospectus a statement that he has given and has not withdrawn his consent 
as aforesaid; or 

(b) if the prospectus does not have the effect, where an application is made in pursuance thereof, 
of  rendering  all  persons  concerned  bound  by  all  the  provisions  of  sections  33  and  40,  so  far  as 
applicable. 

(2) For the purposes of this section, a statement shall be deemed to be included in a prospectus, if it is 
contained in any report or memorandum appearing on the face thereof or by reference incorporated therein 
or issued therewith. 

225 

 
389. Registration of prospectus.—No person shall issue, circulate or distribute in India any prospectus 
offering  for  subscription  in  securities  of  a  company  incorporated  or  to  be  incorporated  outside  India, 
whether  the  company  has  or  has  not  established,  or  when  formed  will  or  will  not  establish,  a  place  of 
business in India, unless before the issue, circulation or distribution of the prospectus in India, a copy thereof 
certified by the chairperson of the company and two other directors of the company as having been approved 
by resolution of the managing body has been delivered for registration to the Registrar and the prospectus 
states on the face of it that a copy has been so delivered, and there is endorsed on or attached to the copy, 
any consent to the issue of the prospectus required by section 388 and such documents as may be prescribed. 

390. Offer of Indian Depository Receipts.—Notwithstanding anything contained in any other law for 

the time being in force, the Central Government may make rules applicable for— 

(a) the offer of Indian Depository Receipts; 

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian 

Depository Receipts; 

(c) the manner in which the Indian Depository Receipts shall be dealt with in a depository mode 

and by custodian and underwriters; and 

(d) the manner of sale, transfer or transmission of Indian Depository Receipts, 

by  a  company  incorporated  or  to  be  incorporated  outside  India,  whether  the  company  has  or  has  not 
established, or will or will not establish, any place of business in India. 

391. Application of sections 34 to 36 and Chapter XX.—(1) The provisions of sections 34 to 36 (both 

inclusive) shall apply to— 

(i) the issue of a prospectus by a company incorporated outside India under section 389 as they 

apply to prospectus issued by an Indian company; 

(ii) the issue of Indian Depository Receipts by a foreign company. 

1[(2)  Subject  to  the  provisions  of  section  376,  the  provisions  of  Chapter  XX  shall  apply  mutatis 
mutandis  for  closure  of  the  place  of  business  of  a  foreign  company  in  India  as  if  it  were  a  company 
incorporated in India in case such foreign company has raised monies through offer or issue of securities 
under this Chapter which have not been repaid or redeemed.] 

392. Punishment for contravention.—Without prejudice to the provisions of section 391, if a foreign 
company contravenes the provisions of this Chapter, the foreign company shall be punishable with fine 
which shall not be less than one lakh rupees but which may extend to three lakh rupees and in the case of a 
continuing offence, with an additional fine which may extend to fifty thousand rupees for every day after 
the first during which the contravention continues and every officer of the foreign company who is in default 
shall be punishable 2*** with fine which shall not be less than twenty-five thousand rupees but which may 
extend to 3[five lakh rupees]. 

393.  Company’s  failure  to  comply  with  provisions  of  this  Chapter  not  to  affect  validity  of 
contracts, etc.—Any failure by a company to comply with the provisions of this Chapter shall not affect 
the validity of any contract, dealing or transaction entered into by the company or its liability to be sued in 
respect thereof, but the company shall not be entitled to bring any suit, claim any set-off, make any counter-
claim  or  institute any  legal  proceeding  in respect of  any  such  contract,  dealing  or  transaction,  until the 
company has complied with the provisions of this Act applicable to it. 

4[393A.  Exemptions  under  this  Chapter.—The  Central  Government  may,  by  notification,  exempt 

any class of— 

(a) foreign companies; 

1. Subs. by Act 1 of 2018, s. 79, for sub-section (2) (w.e.f. 9-2-2018). 
2. The words “with imprisonment for a term which may extend to six months or” omitted by Act 29 of 2020, s. 54 (w.e.f. 21-12-

2020). 

3. Subs. by s. 54, ibid., for “fifty thousand rupees, or with both” (w.e.f. 21-12-2020). 
4. Ins. by s. 55, ibid. (w.e.f. 22-1-2021). 

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(b) companies incorporated or to be incorporated outside India, whether the company has or has 

not established, or when formed may or may not establish, a place of business in India,  

as may be specified in the notification, from any of the provisions of this Chapter and a copy of every 
such notification shall, as soon as may be after it is made, be laid before both Houses of Parliament.] 

CHAPTER XXIII 

GOVERNMENT COMPANIES 

394. Annual reports on Government companies.—(1) Where the Central Government is a member 
of a Government company, the Central Government shall cause an annual report on the working and affairs 
of that company to be— 

(a) prepared within three months of its annual general meeting before which the comments given 
by the Comptroller and Auditor-General of India and the audit report is placed under the proviso to 
sub-section (6) of section 143; and 

(b) as soon as may be after such preparation, laid before both Houses of Parliament together with 
a  copy  of  the  audit  report  and  comments  upon  or  supplement  to  the  audit  report,  made  by  the 
Comptroller and Auditor-General of India. 

(2)  Where  in  addition  to  the  Central  Government,  any  State  Government  is  also  a  member  of  a 
Government company, that State Government shall cause a copy of the annual report prepared under   sub-
section (1) to be laid before the House or both Houses of the State Legislature together with a copy of the 
audit report and the comments upon or supplement to the audit report referred to in sub-section (1). 

395.  Annual  reports  where  one  or  more  State  Governments  are  members  of  companies.—(1) 
Where the Central Government is not a member of a Government company, every State Government which 
is a member of that company, or where only one State Government is a member of the company, that State 
Government shall cause an annual report on the working and affairs of the company to be— 

(a) prepared within the time specified in sub-section (1) of section 394; and 

(b) as soon as may be after such preparation, laid before the House or both Houses of the State 
Legislature together with a copy of the audit report and comments upon or supplement to the audit 
report referred to in sub-section (1) of that section. 

(2)  The  provisions  of  this  section  and  section  394  shall,  so  far  as  may  be,  apply  to  a  Government 

company in liquidation as they apply to any other Government company. 

CHAPTER XXIV 

REGISTRATION OFFICES AND FEES 

396.  Registration  offices.—(1)  For  the  purposes  of  exercising  such  powers  and  discharging  such 
functions as are conferred on the Central Government by or under this Act or under the rules made there 
under and for the purposes of registration of companies under this Act, the Central Government shall, by 
notification, establish such number of offices at such places as it thinks fit, specifying their jurisdiction. 

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(2)  The  Central  Government  may  appoint  such  Registrars,  Additional,  Joint,  Deputy  and  Assistant 
Registrars as it considers necessary for the registration of companies and discharge of various functions 
under this Act, and the powers and duties that may be exercisable by such officers shall be such as may be 
prescribed. 

(3) The terms and conditions of service, including the salaries payable to persons appointed under sub-

section (2), shall be such as may be prescribed. 

(4)  The  Central  Government  may  direct  a  seal  or  seals  to  be  prepared  for  the  authentication  of 

documents required for, or connected with, the registration of companies. 

397. Admissibility of certain documents as evidence.—Notwithstanding anything contained in any 
other law for the time being in force, any document reproducing or derived from returns and documents 
filed by a company with the Registrar on paper or in electronic form or stored on any electronic data storage 
device or computer readable media by the Registrar, and authenticated by the Registrar or any other officer 
empowered  by  the  Central  Government  in  such  manner  as  may  be  prescribed, shall  be  deemed  to  be a 
document  for  the  purposes  of  this  Act  and  the  rules  made  thereunder  and  shall  be  admissible  in  any 
proceedings thereunder without further proof or production of the original as evidence of any contents of 
the original or of any fact stated therein of which direct evidence is admissible. 

398. Provisions relating to filing of applications, documents, inspection, etc., in electronic form.—
(1) Notwithstanding anything to the contrary contained in this Act, and without prejudice to the provisions 
contained in section 6 of the Information Technology Act, 2000 (21 of 2000), the Central Government may 
make rules so as to require from such date as may be prescribed in the rules that— 

(a)  such  applications,  balance  sheet,  prospectus,  return,  declaration,  memorandum,  articles, 
particulars of charges, or any other particulars or document as may be required to be filed or delivered 
under this Act or the rules made thereunder, shall be filed in the electronic form and authenticated in 
such manner as may be prescribed; 

(b) such document, notice, any communication or intimation, as may be required to be served or 
delivered under this Act, in the electronic form and authenticated in such manner as may be prescribed; 

(c) such applications, balance sheet, prospectus, return, register, memorandum, articles, particulars 
of charges, or any other particulars or document and return filed under this Act or rules made thereunder 
shall be maintained by the Registrar in the electronic form and registered or authenticated, as the case 
may be, in such manner as may be prescribed; 

(d) such inspection of the memorandum, articles, register, index, balance sheet, return or any other 
particulars or document maintained in the electronic form, as is otherwise available for inspection under 
this Act or the rules made thereunder, may be made by any person through the electronic form in such 
manner as may be prescribed; 

(e) such fees, charges or other sums payable under this Act or the rules made thereunder shall be 

paid through the electronic form and in such manner as may be prescribed; and 

(f) the Registrar shall register change of registered office, alteration of memorandum or articles, 
1*** issue certificate of incorporation, register such document, issue such certificate, record the notice, 
receive such communication as may be required to be registered or issued or recorded or received, as 
the case may be, under this Act or the rules made thereunder or perform duties or discharge functions 
or exercise powers under this Act or the rules made thereunder or do any act which is by this Act  

1. The word “prospectus” omitted by Act 22 of 2019, s. 38 (w.e.f. 15-8-2019). 

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directed to be performed or discharged or exercised or done by the Registrar in the electronic form in 
such manner as may be prescribed. 

Explanation.— For the removal of doubts, it is hereby clarified that the rules made under this section 
shall  not  relate  to  imposition  of  fines  or  other  pecuniary  penalties  or  demand  or  payment  of  fees  or 
contravention of any of the provisions of this Act or punishment therefor. 

(2)  The  Central  Government  may,  by  notification,  frame  a  scheme  to  carry  out  the  provisions  of          

sub-section (1) through the electronic form. 

399. Inspection, production and evidence of documents kept by Registrar.—(1) Save as otherwise 

provided elsewhere in this Act, any person may— 

(a) inspect by electronic means any documents kept by the Registrar in accordance with the rules 
made, being documents filed or registered by him in pursuance of this Act, or making a record of any 
fact required or authorised to be recorded or registered in pursuance of this Act, on payment for each 
inspection of such fees as may be prescribed; 

(b) require  a certificate  of the incorporation of  any  company,  or  a  copy  or  extract  of  any  other 
document or any part of any other document to be certified by the Registrar, on payment in advance of 
such fees as may be prescribed: 

Provided that the rights conferred by this sub-section shall be exercisable— 

(i) in relation to documents delivered to the Registrar with a prospectus in pursuance of section 
26, only during the fourteen days beginning with the date of publication of the prospectus; and at 
other times, only with the permission of the Central Government; and 

(ii) in relation to documents so delivered in pursuance of clause (b) of sub-section (1) of section 
388, only during the fourteen days beginning with the date of the prospectus; and at other times, 
only with the permission of the Central Government. 

(2) No process for compelling the production of any document kept by the Registrar shall issue from 
any court or the Tribunal except with the leave of that court or the Tribunal and any such process, if issued, 
shall bear thereon a statement that it is issued with the leave of the court or the Tribunal. 

(3) A copy of, or extract from, any document kept and registered at any of the offices for the registration 
of companies under this Act, certified to be a true copy by the Registrar (whose official position it shall not 
be necessary to prove), shall, in all legal proceedings, be admissible in evidence as of equal validity with 
the original document. 

400.  Electronic form to  be  exclusive,  alternative  or  in  addition  to  physical form.—The  Central 
Government may also provide in the rules made under section 398 and section 399 that the electronic form 
for the purposes specified in these sections shall be exclusive, or in the alternative or in addition to the 
physical form, therefor. 

401. Provision of value added services through electronic form.—The Central Government may 
provide  such  value  added  services  through  the  electronic  form  and  levy  such  fee  thereon  as  may  be 
prescribed. 

402. Application of provisions of Information Technology Act, 2000.—All the provisions of the 
Information Technology Act, 2000 (21 of 2000) relating to the electronic records, including the manner and 
format in which the electronic records shall be filed, in so far as they are not inconsistent with this Act, 
shall apply in relation to the records in electronic form specified under section 398. 

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403. Fee for filing, etc.—(1) Any document, required to be submitted, filed, registered or recorded, or 
any fact or information required or authorised to be registered under this Act, shall be submitted, filed, 
registered or recorded within the time specified in the relevant provision on payment of such fee as may be 
prescribed: 

1[Provided that where any document, fact or information required to be submitted, filed, registered or 
recorded, as the case may be, under section 92 or 137 is not submitted, filed, registered or recorded, as the 
case may be, within the period provided in those sections, without prejudice to any other legal action or 
liability under this Act, it may be submitted, filed, registered or recorded, as the case may be, after expiry 
of the period so provided in those sections, on payment of such additional fee as may be prescribed, which 
shall not be less than one hundred rupees per day and different amounts may be prescribed for different 
classes of companies:] 

2[Provided further that where the document, fact or information, as the case may be, in cases other than 
referred to in the first proviso, is not submitted, filed, registered or recorded, as the case may be, within the 
period provided in the relevant section, it may, without prejudice to any other legal action or liability under 
this Act, be submitted, filed, registered or recorded as the case may be, on payment of such additional fee 
as may be prescribed and different fees may be prescribed for different classes of companies: 

3[Provided also that where there is default on two or more occasions in submitting, filing, registering 
or recording of such document, fact or information, as may be prescribed, it may, without prejudice to any 
other legal action or liability under this Act, be submitted, filed, registered or recorded, as the case may be, 
on payment of such higher additional fee, as may be prescribed.]] 

4[(2) Where a company fails or commits any default to submit, file, register or record any document, 
fact or information under sub-section (1) before the expiry of the period specified in the relevant section, 
the company and the officers of the company who are in default, shall, without prejudice to the liability for 
the payment of fee and additional fee, be liable for the penalty or punishment provided under this Act for 
such failure or default.] 

404. Fees, etc., to be credited into public account.—All fees, charges and other sums received by any 
Registrar, Additional, Joint, Deputy or Assistant Registrar or any other officer of the Central Government 
in pursuance of any provision of this Act shall be paid into the public account of India in the Reserve Bank 
of India. 

CHAPTER XXV 

COMPANIES TO FURNISH INFORMATION OR STATISTICS 

405. Power of Central Government to direct companies to furnish information or statistics.—(1) 
The Central Government may, by order, require companies generally, or any class of companies, or any 
company, to furnish such information or statistics with regard to their or its constitution or working, and 
within such time, as may be specified in the order. 

(2) Every order under sub-section (1) shall be published in the Official Gazette and may be addressed 
to companies generally or to any class of companies, in such manner, as the Central Government may think 
fit and the date of such publication shall be deemed to be the date on which requirement for information or 
statistics is made on such companies or class of companies, as the case may be. 

1. Subs. by Act 1 of 2018, s. 80, for the first proviso (w.e.f. 7-5-2018). 
2. Subs. by, s. 80, ibid, for second and third proviso (w.e.f. 1-7-2022). 
3. Subs. by Act 29 of 2020, s. 56, for the third proviso (w.e.f. 1-7-2022). 
4. Subs. by Act 1 of 2018, s. 80, for sub-section (2) (w.e.f. 7-5-2018).  

230 

 
                                                           
(3) For the purpose of satisfying itself that any information or statistics furnished by a company or 
companies in pursuance of any order under sub-section (1) is correct and complete, the Central Government 
may by order require such company or companies to produce such records or documents in its possession 
or allow inspection thereof by such officer or furnish such further information as that Government may 
consider necessary. 

1[(4) If any company fails to comply with an order made under sub-section (1) or sub-section (3), or 
furnishes any information or statistics which is incorrect or incomplete in any material respect, the company 
and every officer of the company who is in default, shall be liable to a penalty of twenty 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 three lakh rupees.] 

(5) Where a foreign company carries on business in India, all references to a company in this section 
shall  be  deemed  to  include  references  to  the  foreign  company  in  relation,  and  only  in  relation,  to  such 
business. 

CHAPTER XXVI 

NIDHIS 

2[406. Provision relating to Nidhis and its application, etc.—(1) In this section, “Nidhi” or “Mutual 
Benefit  Society”  means  a  company  which  the  Central  Government  may,  by  notification  in  the  Official 
Gazette, declare to be a Nidhi or Mutual Benefit Society, as the case may be. 

(2)  The  Central  Government  may,  by  notification  in  the  Official  Gazette,  direct  that  any  of  the 

provisions of this Act specified in the notification— 

(a) shall not apply to any Nidhi or Mutual Benefit Society; or 

(b) shall apply to any Nidhi or Mutual Benefit Society with such exceptions, modifications and 

adaptations as may be specified in the notification. 

(3) A copy of every notification proposed to be issued under sub-section (2), shall be laid in draft before 
each House of Parliament, while it is in session, for a total period of thirty days, and if, both Houses agree 
in  disapproving  the  issue  of  notification  or  both  Houses  agree  in  making  any  modification  in  the 
notification, the notification shall not be issued or, as the case may be, shall be issued only in such modified 
form as may be agreed upon by both the Houses. 

(4) In reckoning any such period of thirty days as is referred to in sub-section (3), no account shall be 
taken of any period during which the House referred to in sub-section (3) is prorogued or adjourned for 
more than four consecutive days. 

(5) The copies of every notification issued under this section shall, as soon as may be after it has been 

issued, be laid before each House of Parliament.] 

1. Subs. by Act 29 of 2020, s. 57, for sub-section (4) (w.e.f. 21-12-2020). 
2. Subs. by Act 1 of 2018, s. 81, for section 406 (w.e.f. 15-8-2019). 

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CHAPTER XXVII 

NATIONAL COMPANY LAW TRIBUNAL AND APPELLATE TRIBUNAL 

407. Definitions.—In this Chapter, unless the context otherwise requires,— 
(a) “Chairperson” means the Chairperson of the Appellate Tribunal; 
(b) “Judicial Member” means a member of the Tribunal or the Appellate Tribunal appointed as 

such and includes the President or the Chairperson, as the case may be; 

(c) “Member” means a member, whether Judicial or Technical of the Tribunal or the Appellate 

Tribunal and includes the President or the Chairperson, as the case may be; 

(d) “President” means the President of the Tribunal; 
(e) “Technical Member” means a member of the Tribunal or the Appellate Tribunal appointed as 

such. 

408.  Constitution  of  National  Company  Law  Tribunal.—The  Central  Government  shall,  by 
notification, constitute, with effect from such date as may be specified therein, a Tribunal to be known as 
the National Company Law Tribunal consisting of a President and such number of Judicial and Technical 
members, as the Central Government may deem necessary, to be appointed by it by notification, to exercise 
and discharge such powers and functions as are, or may be, conferred on it by or under this Act or any other 
law for the time being in force. 

409. Qualification of President and Members of Tribunal.—(1) The President shall be a person who 

is or has been a Judge of a High Court for five years. 

(2) A person shall not be qualified for appointment as a Judicial Member unless he— 

(a) is, or has been, a judge of a High Court; or 

(b) is, or has been, a District Judge for at least five years; or 

(c) has, for at least ten years been an advocate of a court. 

Explanation.—For the purposes of clause (c), in computing the period during which a person has 
been an advocate of a court, there shall be included any period during which the person has held judicial 
office or the office of a member of a tribunal or any post, under the Union or a State, requiring special 
knowledge of law after he become an advocate. 

(3) A person shall not be qualified for appointment as a Technical Member unless he— 

(a) has, for at least fifteen years been a member of the Indian Corporate Law Service or Indian 
Legal Service 1[and has been holding the rank of Secretary or Additional Secretary to the Government 
of India]; or 

(b) is, or has been, in practice as a chartered accountant for at least fifteen years; or 

(c) is, or has been, in practice as a cost accountant for at least fifteen years; or 

(d) is, or has been, in practice as a company secretary for at least fifteen years; or 

2[(e) is a person of proven ability, integrity and standing having special knowledge and professional experience 
of not less than fifteen years in industrial finance, industrial management, industrial reconstruction, investment 
and accountancy.] 

(f) is, or has been, for at least five years, a presiding officer of a Labour Court, Tribunal or National 

Tribunal constituted under the Industrial Disputes Act, 1947 (14 of 1947). 

410. Constitution of Appellate Tribunal.—The Central Government shall, by notification, constitute, 
with effect from such date as may be specified therein, an Appellate Tribunal to be known as the National 
Company Law Appellate Tribunal consisting of a chairperson and such number of Judicial and Technical 

1. Subs. by Act 1 of 2018, s. 82, for “out of which at least three years shall be in the pay scale of Joint Secretary to the Government 

of India or equivalent or above in that service” (w.e.f  9-2-2018). 

2. Subs. by Act 1 of 2018, s. 82, for clause (e) (w.e.f. 9-2-2018). 

232 

 
                                                           
Members, 1***, as the Central Government may deem fit, to be appointed by it by notification, 2[for hearing 
appeals against— 

(a) the 3[orders of the Tribunal or of the National Financial Reporting Authority] under this Act; and 

(b)  any  direction,  decision  or  order  referred  to  in  4[section  53A]  of  the  Competition  Act,  2002               

(12 of 2002) in accordance with the provisions of that Act]. 

411. Qualifications of chairperson and Members of Appellate Tribunal.—(1) The chairperson shall 

be a person who is or has been a Judge of the Supreme Court or the Chief Justice of a High Court. 

(2) A Judicial Member shall be a person who is or has been a Judge of a High Court or is a Judicial 

Member of the Tribunal for five years. 

5[(3)  A  technical  member  shall  be  a  person  of  proven  ability,  integrity  and  standing  having  special 
knowledge  and  professional  experience  of  not  less  than  twenty-five  years  in  industrial  finance,  industrial 
management, industrial reconstruction, investment and accountancy.] 

412. Selection of Members of Tribunal and Appellate Tribunal.— (1) The President of the Tribunal 
and the chairperson and Judicial Members of the Appellate Tribunal, shall be appointed after consultation 
with the Chief Justice of India. 

6[(2)  The  Members  of  the  Tribunal  and  the  Technical  Members  of  the  Appellate  Tribunal  shall  be 

appointed on the recommendation of a Selection Committee consisting of— 

(a) Chief Justice of India or his nominee—Chairperson; 

(b) a senior Judge of the Supreme Court or Chief Justice of High Court— Member; 

(c) Secretary in the Ministry of Corporate Affairs—Member; and 

(d) Secretary in the Ministry of Law and Justice—Member. 

(2A) Where in a meeting of the Selection Committee, there is equality of votes on any matter, the 

Chairperson shall have a casting vote.] 

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

(4) The Selection Committee shall determine its procedure for recommending persons under         sub-

section (2). 

(5) No appointment of the Members of the Tribunal or the Appellate Tribunal shall be invalid merely 

by reason of any vacancy or any defect in the constitution of the Selection Committee. 

413. Term of office of President, chairperson and other Members.— (1) The President and every 
other Member of the Tribunal shall hold office as such for a term of five years from the date on which he 
enters upon his office, but shall be eligible for re-appointment for another term of five years. 

(2) A Member of the Tribunal shall hold office as such until he attains,— 

(a) in the case of the President, the age of sixty-seven years; 

(b) in the case of any other Member, the age of sixty-five years: 

Provided that a person who has not completed fifty years of age shall not be eligible for appointment 

as Member: 

Provided further that the Member may retain his lien with his parent cadre or Ministry or Department, 

as the case may be, while holding office as such for a period not exceeding one year. 

1. The words “not exceeding eleven” omitted by Act 29 of 2020, s. 58 (w.e.f. 22-1-2021). 
2. Subs. by Act 7 of 2017, s. 172, for  “for hearing appeals against the orders to the Tribunal” (w.e.f. 26-5-2017). 
3. Subs. by Act 1 of 2018, s. 83 for “orders of the Tribunal” (w.e.f. 7-5-2018). 
4. Subs. by Act 29 of 2020, s. 58, for “section 53N” (w.e.f. 22-1-2021). 
5. Subs. by Act 1 of 2018, s. 84, for sub-section (3) (w.e.f. 9-2-2018). 
6. Subs. by s. 85, ibid., for sub-section (2) (w.e.f. 9-2-2018). 

233 

 
                                                           
(3) The chairperson or a Member of the Appellate Tribunal shall hold office as such for a term of five 
years from the date on which he enters upon his office, but shall be eligible for re-appointment for another 
term of five years. 

(4) A Member of the Appellate Tribunal shall hold office as such until he attains,— 

(a) in the case of the Chairperson, the age of seventy years; 

(b) in the case of any other Member, the age of sixty-seven years: 

Provided that a person who has not completed fifty years of age shall not be eligible for appointment 

as Member: 

Provided further that the Member may retain his lien with his parent cadre or Ministry or Department, 

as the case may be, while holding office as such for a period not exceeding one year. 

414.  Salary,  allowances  and  other  terms  and  conditions  of  service  of  Members.—The  salary, 
allowances and other terms and conditions of service of the Members of the Tribunal and the Appellate 
Tribunal shall be such as may be prescribed: 

Provided that neither the salary and allowances nor the other terms and conditions of service of the 

Members shall be varied to their disadvantage after their appointment. 

415. Acting President and Chairperson of Tribunal or Appellate Tribunal.—(1) In the event of the 
occurrence  of  any  vacancy  in  the  office  of  the  President  or  the  Chairperson  by  reason  of  his  death, 
resignation or otherwise, the senior-most Member shall act as the President or the Chairperson, as the case 
may be, until the date on which a new President or Chairperson appointed in accordance with the provisions 
of this Act to fill such vacancy enters upon his office. 

(2) When the President or the Chairperson is unable to discharge his functions owing to absence, illness 
or  any  other  cause,  the  senior-most  Member  shall  discharge  the  functions  of  the  President  or  the 
Chairperson, as the case may be, until the date on which the President or the Chairperson resumes his duties. 

416. Resignation of Members.—The President, the Chairperson or any Member may, by notice in 

writing under his hand addressed to the Central Government, resign from his office: 

Provided  that  the  President,  the  Chairperson,  or  the  Member  shall  continue  to  hold  office  until  the 
expiry of three months from the date of receipt of such notice by the Central Government or until a person 
duly appointed as his successor enters upon his office or until the expiry of his term of office, whichever is 
earliest. 

417.  Removal  of  Members.—(1)  The  Central  Government  may,  after  consultation  with  the  Chief 

Justice of India, remove from office the President, Chairperson or any Member, who— 

(a) has been adjudged an insolvent; or 

(b) has been convicted of an offence which, in the opinion of the Central Government, involves 

moral turpitude; or 

(c) has become physically or mentally incapable of acting as such President, the Chairperson, or 

Member; or 

(d) has acquired such financial or other interest as is likely to affect prejudicially his functions as 

such President, the Chairperson or Member; or 

(e) has so abused his position as to render his continuance in office prejudicial to the public interest: 

Provided that the President, the Chairperson or the Member shall not be removed on any of the grounds 

specified in clauses (b) to (e) without giving him a reasonable opportunity of being heard. 

(2) Without prejudice to the provisions of sub-section (1), the President, the Chairperson or the Member 
shall not be removed from his office except by an order made by the Central Government on the ground of 
proved misbehaviour or incapacity after an inquiry made by a Judge of the Supreme Court nominated by 
the Chief Justice of India on a reference made to him by the Central Government in which such President, 

234 

 
the  Chairperson  or  Member  had  been  informed  of  the  charges  against  him  and  given  a  reasonable 
opportunity of being heard. 

(3) The Central Government may, with the concurrence of the Chief Justice of India, suspend from 
office, the President, the Chairperson or Member in respect of whom reference has been made to the Judge 
of the Supreme Court under sub-section (2) until the Central Government has passed orders on receipt of 
the report of the Judge of the Supreme Court on such reference. 

(4) The Central Government shall, after consultation with the Supreme Court, make rules to regulate 
the procedure for the inquiry on the ground of proved misbehaviour or incapacity referred to in                 sub-
section (2). 

1[417A. Qualifications, terms and conditions of service of Chairperson and Member.—Notwithstanding 
anything  contained  in this Act,  the  qualifications,  appointment, term  of  office,  salaries  and  allowances, 
resignation, removal and other terms and conditions of service of the Chairperson and other Members of 
the Appellate Tribunal appointed after the commencement of 2[the Tribunals Reforms Act, 2021, shall be 
governed by the provisions of Chapter II of the said Act]: 

Provided  that  the  Chairperson  and  Member  appointed  before  the  commencement  of  Part  XIV  of 
Chapter VI of the Finance Act, 2017, shall continue to be governed by the provisions of this Act and the 
rules made thereunder as if the provisions of section 184 of the Finance Act, 2017 had not come into force.] 

418. Staff of Tribunal and Appellate Tribunal.—(1) The Central Government shall, in consultation 
with the Tribunal and the Appellate Tribunal, provide the Tribunal and the Appellate Tribunal, as the case 
may be, with such officers and other employees as may be necessary for the exercise of the powers and 
discharge of the functions of the Tribunal and the Appellate Tribunal. 

(2) The officers and other employees of the Tribunal and the Appellate Tribunal shall discharge their 
functions  under  the  general  superintendence  and  control  of  the  President,  or  as  the  case  may  be,  the 
Chairperson, or any other Member to whom powers for exercising such superintendence and control are 
delegated by him. 

(3) The salaries and allowances and other conditions of service of the officers and other employees of 

the Tribunal and the Appellate Tribunal shall be such as may be prescribed. 

3[418A. Benches of Appellate Tribunal.—(1) The powers of the Appellate Tribunal may be exercised 

by the Benches thereof to be constituted by the Chairperson: 

Provided  that  a  Bench  of  the  Appellate  Tribunal  shall  have  at  least  one  Judicial  Member  and  one 

Technical Member. 

(2) The Benches of the Appellate Tribunal shall ordinarily sit at New Delhi or such other places as the 

Central Government may, in consultation with the Chairperson, notify: 

Provided that the Central Government may, by notification, after consultation with the Chairperson, 
establish such number of Benches of the Appellate Tribunal, as it may consider necessary, to hear appeals 
against any direction, decision or order referred to in section 53A of the Competition Act, 2002 (12 of 2003) 
and under section 61 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016).] 

419. Benches of Tribunal.—(1) There shall be constituted such number of Benches of the Tribunal, 

as may, by notification, be specified by the Central Government. 

(2) The Principal Bench of the Tribunal shall be at New Delhi which shall be presided over by the 

President of the Tribunal. 

(3) The powers of the Tribunal shall be exercisable by Benches consisting of two Members out of whom 

one shall be a Judicial Member and the other shall be a Technical Member: 

1. Ins. by Act 7 of 2017, s. 172 (w.e.f. 26-5-5017). 
2. Subs. by Act 33 of 2021, s. 28, for “Part XIV of Chapter VI of the Finance Act, 2017 (7 of 2017), shall be governed by the 

provisions of the section 184 of that Act” (w.e.f. 4-4-2021). 

3. Ins. by Act 29 of 2020, s. 59 (w.e.f. 22-1-2021). 

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Provided that it shall be competent for the Members of the Tribunal authorised in this behalf to function 
as a Bench consisting of a single Judicial Member and exercise the powers of the Tribunal in respect of 
such class of cases or such matters pertaining to such class of cases, as the President may, by general or 
special order, specify: 

Provided further that if at any stage of the hearing of any such case or matter, it appears to the Member 
that the case or matter is of such a nature that it ought to be heard by a Bench consisting of two Members, 
the case or matter may be transferred by the President, or, as the case may be, referred to him for transfer, 
to such Bench as the President may deem fit. 

1[(4) The Central Government shall, by notification, establish such number of benches of the Tribunal, 
as  it  may  consider  necessary,  to  exercise  the  jurisdiction,  powers  and  authority  of  the  Adjudicating 
Authority conferred on such Tribunal by or under Part II of the Insolvency and Bankruptcy Code, 2016 (31 
of 2016).] 

(5) If the Members of a Bench differ in opinion on any point or points, it shall be decided according to 
the majority, if there is a majority, but if the Members are equally divided, they  shall state the point or 
points on which they differ, and the case shall be referred by the President for hearing on such point or 
points  by  one  or  more  of  the  other Members  of  the Tribunal and  such  point  or  points  shall  be decided 
according to the opinion of the majority of Members who have heard the case, including those who first 
heard it. 

420. Orders of Tribunal.—(1) The Tribunal may, after giving the parties to any proceeding before it, 

a reasonable opportunity of being heard, pass such orders thereon as it thinks fit. 

(2) The Tribunal may, at any time within two years from the date of the order, with a view to rectifying 
any mistake apparent from the record, amend any order passed by it, and shall make such amendment, if 
the mistake is brought to its notice by the parties: 

Provided that no such amendment shall be made in respect of any order against which an appeal has 

been preferred under this Act. 

(3) The Tribunal shall send a copy of every order passed under this section to all the parties concerned. 

421. Appeal from orders of Tribunal.—(1) Any person aggrieved by an order of the Tribunal may 

prefer an appeal to the Appellate Tribunal. 

(2) No appeal shall lie to the Appellate Tribunal from an order made by the Tribunal with the consent 

of parties. 

(3) Every appeal under sub-section (1) shall be filed within a period of forty-five days from the date on 
which a copy of the order of the Tribunal is made available to the person aggrieved and shall be in such 
form, and accompanied by such fees, as may be prescribed: 

Provided that the Appellate Tribunal may entertain an appeal after the expiry of the said period of forty-
five days from the date aforesaid, but within a further period not exceeding forty-five days, if it is satisfied 
that the appellant was prevented by sufficient cause from filing the appeal within that period. 

(4) On the receipt of an appeal under sub-section  (1), the Appellate Tribunal shall, after giving the 
parties  to  the  appeal  a  reasonable  opportunity  of  being  heard,  pass  such  orders  thereon  as  it  thinks  fit, 
confirming, modifying or setting aside the order appealed against. 

(5) The Appellate Tribunal shall send a copy of every order made by it to the Tribunal and the parties 

to appeal. 

422. Expeditious disposal by Tribunal and Appellate Tribunal.—(1) Every application or petition 
presented before the Tribunal and every appeal filed before the Appellate Tribunal shall be dealt with and 
disposed of by it as expeditiously as possible and every endeavour shall be made by the Tribunal or the 
Appellate Tribunal, as the case may be, for the disposal of such application or petition or appeal within 

1. Subs. by Act 31 of 2016, s. 255 and the Eleventh Schedule, for sub-section (4) (w.e.f. 15-11-2016). 

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three months from the date of its presentation before the Tribunal or the filing of the appeal before the 
Appellate Tribunal. 

(2) Where any application or petition or appeal is not disposed of within the period specified in sub-
section (1), the Tribunal or, as the case may be, the Appellate Tribunal, shall record the reasons for not 
disposing of the application or petition or the appeal, as the case may be, within the period so specified; and 
the President or the Chairperson, as the case may be, may, after taking into account the reasons so recorded, 
extend the period referred to in sub-section (1) by such period not exceeding ninety days as he may consider 
necessary. 

423. Appeal to Supreme Court.—Any person aggrieved by any order of the Appellate Tribunal may 
file an appeal to the Supreme Court within sixty days from the date of receipt of the order of the Appellate 
Tribunal to him on any question of law arising out of such order: 

Provided that the Supreme Court may, if it is satisfied that the appellant was prevented by sufficient 
cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding 
sixty days. 

424.  Procedure  before  Tribunal  and  Appellate  Tribunal.—(1)  The  Tribunal  and  the  Appellate 
Tribunal shall not, while disposing of any proceeding before it or, as the case may be, an appeal before it, 
be bound by the procedure laid down in the Code of Civil Procedure, 1908 (5 of 1908), but shall be guided 
by the principles of natural justice, and, subject to the other provisions of this Act  1[or of the Insolvency 
and Bankruptcy Code, 2016 (31 of 2016)] and of any rules made hereunder, the Tribunal and the Appellate 
Tribunal shall have power to regulate their own procedure. 

(2) The Tribunal and the Appellate Tribunal shall have, for the purposes of discharging their functions 
under this Act 1[or under the Insolvency and Bankruptcy Code, 2016 (31 of 2016)], the same powers as are 
vested in a civil court under the Code of Civil Procedure, 1908 (5 of 1908) while trying a suit in respect of 
the following matters, namely:— 

(a) summoning and enforcing the attendance of any person and examining him on oath; 

(b) requiring the discovery and production of documents; 

(c) receiving evidence on affidavits; 

(d) subject to the provisions of sections 123 and 124 of the Indian Evidence Act,1872 (1 of 1872), 

requisitioning any public record or document or a copy of such record or document from any office; 

(e) issuing commissions for the examination of witnesses or documents; 

(f) dismissing a representation for default or deciding it ex parte; 

(g) setting aside any order of dismissal of any representation for default or any order passed by it 

ex parte; and 

(h) any other matter which may be prescribed. 

(3) Any order made by the Tribunal or the Appellate Tribunal may be enforced by that Tribunal in the 
same manner as if it were a decree made by a court in a suit pending therein, and it shall be lawful for the 
Tribunal or the Appellate Tribunal to send for execution of its orders to the court within the local limits of 
whose jurisdiction,— 

(a) in the case of an order against a company, the registered office of the company is situate; or 

(b) in the case of an order against any other person, the person concerned voluntarily resides or 

carries on business or personally works for gain. 

(4)  All  proceedings  before  the  Tribunal  or  the  Appellate  Tribunal  shall  be  deemed  to  be  judicial 
proceedings within the meaning of sections 193 and 228, and for the purposes of section 196 of the Indian 
Penal Code (45 of 1860), and the Tribunal and the Appellate Tribunal shall be deemed to be civil court for 
the purposes of section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of 1974). 

1. Ins. by Act 31 of 2016, s. 255 and the Eleventh Schedule (w.e.f. 15-11-2016). 

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425. Power to punish for contempt.— The Tribunal and the Appellate Tribunal shall have the same 
jurisdiction, powers and authority in respect of contempt of themselves as the High Court has and may 
exercise,  for  this  purpose,  the  powers  under  the  provisions  of  the  Contempt  of  Courts  Act,  1971(70  of 
1971),which shall have the effect subject to modifications that— 

(a) the reference therein to a High Court shall be construed as including a reference to the Tribunal 

and the Appellate Tribunal; and 

(b) the reference to Advocate-General in section 15 of the said Act shall be construed as a reference 

to such Law Officers as the Central Government may, specify in this behalf. 

426. Delegation of powers.—The Tribunal or the Appellate Tribunal may, by general or special order, 
direct, subject to such conditions, if any, as may be specified in the order, any of its officers or employees 
or any other person authorised by it to inquire into any matter connected with any proceeding or, as the case 
may be, appeal before it and to report to it in such manner as may be specified in the order. 

427. President, Members, officers, etc., to be public servants.—The President, Members, officers 
and other employees of the Tribunal and the Chairperson, Members, officers and other employees of the 
Appellate Tribunal shall be deemed to be public servants within the meaning of section 21 of the Indian 
Penal Code (45 of 1860). 

428. Protection of action taken in good faith.—No suit, prosecution or other legal proceeding shall 
lie  against  the  Tribunal,  the  President,  Member,  officer  or  other  employee,  or  against  the  Appellate 
Tribunal, the Chairperson, Member, officer or other employees thereof or liquidator or any other person 
authorised by the Tribunal or the Appellate Tribunal for the discharge of any function under this Act in 
respect of  any  loss  or  damage  caused or likely  to  be caused  by  any  act  which  is  in  good  faith  done  or 
intended to be done in pursuance of this Act. 

429. Power to seek assistance of Chief Metropolitan Magistrate, etc.—1[(1) The Tribunal may, in 
any proceedings for winding up of a company under this Act or in any proceedings under the Insolvency 
and Bankruptcy Code, 2016 (31 of 2016), in order to take into custody or under its control all property, 
books of account or other documents, request, in writing, the Chief Metropolitan Magistrate, Chief Judicial 
Magistrate or the District Collector within whose jurisdiction any such property, books of account or other 
documents of such company under this Act or of corporate persons under the said Code, are situated or 
found, to take possession thereof, and the Chief Metropolitan Magistrate, Chief Judicial Magistrate or the 
District Collector, as the case may be, shall, on such request being made to him,— 

(a) take possession of such property, books of account or other documents; and 

(b) cause the same to be entrusted to the Tribunal or other persons authorised by it.] 

(2)  For  the  purpose  of  securing  compliance  with  the  provisions  of  sub-section  (1),  the  Chief 
Metropolitan Magistrate, Chief Judicial Magistrate or the District Collector may take or cause to be taken 
such steps and use or cause to be used such force as may, in his opinion, be necessary. 

(3) No act of the Chief Metropolitan Magistrate, Chief Judicial Magistrate or the District Collector done 
in pursuance of this section shall be called in question in any court or before any authority on any ground 
whatsoever. 

430. Civil court not to have jurisdiction.—No civil court shall have jurisdiction to entertain any suit 
or  proceeding  in  respect  of  any  matter  which  the  Tribunal  or  the  Appellate  Tribunal  is  empowered  to 
determine by or under this Act or any other law for the time being in force and no injunction shall be granted 
by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by 
or under this Act or any other law for the time being in force, by the Tribunal or the Appellate Tribunal. 

431. Vacancy in Tribunal or Appellate Tribunal not to invalidate acts or proceedings.—No act or proceeding 
of the Tribunal or the Appellate Tribunal shall be questioned or shall be invalid merely on the ground of the existence 
of any vacancy or defect in the constitution of the Tribunal or the Appellate Tribunal, as the case may be. 

432. Right to legal representation.—A party to any proceeding or appeal before the Tribunal or the Appellate 
Tribunal, as the case may be, may either appear in person or authorise one or more chartered accountants or company 

1. Subs. by Act 31 of 2016, s. 255 and the Eleventh Schedule, for section 429 (w.e.f. 15-11-2016). 

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secretaries or cost accountants or legal practitioners or any other person to present his case before the Tribunal or the 
Appellate Tribunal, as the case may be. 

433.  Limitation.—The  provisions  of  the  Limitation  Act,  1963  (36  of  1963)  shall,  as  far  as  may  be,  apply  to 

proceedings or appeals before the Tribunal or the Appellate Tribunal, as the case maybe. 

1[434.  Transfer  of  certain  pending  proceedings.—(1)  On  such  date  as  may  be  notified  by  the  Central 

Government in this behalf,— 

(a) all matters, proceedings or cases pending before the Board of Company Law Administration (herein in 
this  section  referred  to  as  the  Company  Law  Board)  constituted  under  sub-section  (1)  of  section  10E  of  the 
Companies Act, 1956 (1 of 1956), immediately before such date shall stand transferred to the Tribunal and the 
Tribunal shall dispose of such matters, proceedings or cases in accordance with the provisions of this Act; 

(b) any person aggrieved by any decision or order of the Company Law Board made before such date may 
file an appeal to the High Court within sixty days from the date of communication of the decision or order of the 
Company Law Board to him on any question of law arising out of such order: 

Provided that the High Court may if it is satisfied that the appellant was prevented by sufficient cause from 

filing an appeal within the said period, allow it to be filed within a further period not exceeding sixty days; and 

(c) all proceedings under the Companies Act, 1956 (1 of 1956), including proceedings relating to arbitration, 
compromise, arrangements and reconstruction and winding up of companies, pending immediately before such 
date before any District Court or High Court, shall stand transferred to the Tribunal and the Tribunal may proceed 
to deal with such proceedings from the stage before their transfer: 

Provided  that  only  such  proceedings  relating  to  the  winding  up  of  companies  shall  be  transferred  to  the 

Tribunal that are at a stage as may be prescribed by the Central Government: 

2[Provided  further  that  any  party  or  parties  to  any  proceedings  relating  to  the  winding  up  of  companies 
pending  before  any  Court  immediately  before  the  commencement  of  the  Insolvency  and  Bankruptcy  Code 
(Amendment) Ordinance, 2018, may file an application of transfer of such proceedings and the Court may by 
order  transfer  such  proceedings  to  the  Tribunal  and  the  proceedings  so  transferred  shall  be  dealt  with  by  the 
Tribunal  as  an  application  for  initiation  of  corporate  insolvency  resolution  process  under  the  Insolvency  and 
Bankruptcy Code, 2016 (31 of 2016). 

3[Provided further that only such proceedings relating to cases other than winding-up, for which orders for 
allowing or otherwise of the proceedings are not reserved by the High Courts shall be transferred to the Tribunal 

4[Provided also that]— 

(i)  all  proceedings  under  the  Companies  Act,  1956  other  than  the  cases  relating  to  winding  up  of 

companies that are reserved for orders for allowing or otherwise such proceedings; or 

(ii) the proceedings relating to winding up of companies which have not been transferred from the High 

Courts; 

shall be dealt with in accordance with provisions of the Companies Act, 1956 and the Companies (Court) Rules, 
1959.] 

5[Provided also that proceedings relating to cases of voluntary winding up of a company where notice of 
the resolution by advertisement has been given under sub-section (1) of section 485 of the Companies Act, 
1956 but the company  has not been dissolved before the 1st  April, 2017 shall continue  to be dealt  with in 
accordance with provisions of the Companies Act, 1956 and the Companies (Court) Rules, 1959.] 

(2) The Central Government may make rules consistent with the provisions of this Act to ensure timely 
transfer of all matters, proceedings or cases pending before the Company Law Board or the courts, to the 
Tribunal under this section.] 

1. Subs. by Act 31 of 2016, s. 255 and the Eleventh Schedule, for section 434 (w.e.f. 15-11-2016). 
2. Ins. by Act 26 of 2018, s. 39 (w.e.f. 6-6-2018). 
3. Ins. by Notification No. S.O. 3676(E), dated 7th December 2016 (w.e.f. 15-12-2016). 
4. Subs. by Notification No. S.O. 2042(E), dated 29th June 2017 for “Provided further that” (w.e.f. 29-6-2017). 
5. Ins., ibid. (w.e.f. 29-6-2017). 

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CHAPTER XXVIII 
SPECIAL COURTS 

1[435.  Establishment  of  Special  Courts.—  (1)  The  Central  Government  may,  for  the  purpose  of 
providing speedy trial of 2[offences under this Act, except under section 452, by notification] establish or 
designate as many Special Courts as may be necessary.  

(2) A Special Court shall consist of— 

 (a) a single judge holding office as Session Judge or Additional Session Judge, in case of offences 

punishable under this Act with imprisonment of two years or more; and 

 (b) a Metropolitan Magistrate or a Judicial Magistrate of the First Class, in the case of other offences,  
who shall be appointed by the Central Government with the concurrence of the Chief Justice of the High 
Court within whose jurisdiction the judge to be appointed is working.] 

436. Offences triable by Special Courts.—(1) Notwithstanding anything contained in the Code of 

Criminal Procedure, 1973 (2 of 1974),— 

(a) 3[all offences specified under sub-section (1) of section 435] shall be triable only by the Special 
Court established or designated for the area in which the registered office of the company in relation to 
which the offence is committed or where there are more Special Courts than one for such area, by such 
one of them as may be specified in this behalf by the High Court concerned; 

(b) where a person accused of, or suspected of the commission of, an offence under this Act is 
forwarded  to  a  Magistrate  under  sub-section  (2)  or  sub-section  (2A)  of  section  167  of  the  Code  of 
Criminal Procedure, 1973 (2 of 1974), such Magistrate may authorise the detention of such person in 
such custody as he thinks fit for a period not exceeding fifteen days in the whole where such Magistrate 
is a Judicial Magistrate and seven days in the whole where such Magistrate is an Executive Magistrate: 
Provided that where such Magistrate considers that the detention of such person upon or before the 
expiry  of  the  period  of  detention  is  unnecessary,  he  shall  order  such  person  to be  forwarded  to  the 
Special Court having jurisdiction; 

(c) the Special Court may exercise, in relation to the person forwarded to it under clause (b), the 
same power which a Magistrate having jurisdiction to try a case may exercise under section 167 of the 
Code of Criminal Procedure, 1973 (2 of 1974) in relation to an accused person who has been forwarded 
to him under that section; and 

(d) a Special Court may, upon perusal of the police report of the facts constituting an offence under 
this Act or upon a complaint in that behalf, take cognizance of that offence without the accused being 
committed to it for trial. 
(2) When trying an offence under this Act, a Special Court may also try an offence other than an offence 
under this Act with which the accused may, under the Code of Criminal Procedure, 1973 (2 of 1974) be 
charged at the same trial. 

(3)  Notwithstanding  anything  contained  in  the  Code  of  Criminal  Procedure,  1973  (2  of  1974),  the 
Special Court may, if it thinks fit, try in a summary way any offence under this Act which is punishable 
with imprisonment for a term not exceeding three years: 

Provided that in the case of any conviction in a summary trial, no sentence of imprisonment for a term 

exceeding one year shall be passed: 

Provided further that when at the commencement of, or in the course of, a summary trial, it appears to 
the Special Court that the nature of the case is such that the sentence of imprisonment for a term exceeding 
one year may have to be passed or that it is, for any other reason, undesirable to try the case summarily, the 
Special Court shall, after hearing the parties, record an order to that effect and thereafter recall any witnesses 
who may have been examined and proceed to hear or rehear the case in accordance with the procedure for 
the regular trial. 

437. Appeal and revision.—The High Court may exercise, so far as may be applicable, all the powers 
conferred by Chapters XXIX and XXX of the Code of Criminal Procedure, 1973 (2 of 1974) on a High 

1. Subs. by Act 1 of 2018, s. 86, for “section 435” (w.e.f. 7-5-2018).  
2. Subs. by Act 29 of 2020, s. 60, for “offences under this Act, by notification” (w.e.f. 22-1-2021). 
3. Subs. by Act 21 of 2015, s. 22, for “all offences under this Act” (w.e.f. 29-5-2015). 

240 

 
                                                           
Court, as if a Special Court within the local limits of the jurisdiction of the High Court were a Court of 
Session trying cases within the local limits of the jurisdiction of the High Court. 

438. Application of Code to proceedings before Special Court.—Save as otherwise provided in this 
Act, the provisions of the Code of Criminal Procedure, 1973 (2 of 1974) shall apply to the proceedings 
before a Special Court and for the purposes of the said provisions, the Special Court shall be 1[deemed to 
be a Court of Session or the court of Metropolitan Magistrate or a Judicial Magistrate of the First Class, as 
the case may be,] and the person conducting a prosecution before a Special Court shall be deemed to be a 
Public Prosecutor. 

439.  Offences  to  be  non-cognizable.—(1)  Notwithstanding  anything  in  the  Code  of  Criminal 
Procedure, 1973 (2 of 1974), every offence under this Act except the offences referred to in sub-section (6) 
of section 212 shall be deemed to be non-cognizable within the meaning of the said Code. 

(2)  No  court  shall  take  cognizance  of  any  offence  under  this  Act  which  is  alleged  to  have  been 
committed by any company or any officer thereof, except on the complaint in writing of the Registrar, a 
shareholder 2[or a member] of the company, or of a person authorised by the Central Government in that 
behalf: 

Provided that the court may take cognizance of offences relating to issue and transfer of securities and 
non-payment of dividend, on a complaint in writing, by a person authorised by the Securities and Exchange 
Board of India: 

Provided further that nothing in this sub-section shall apply to a prosecution by a company of any of 

its officers. 

(3) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974),where 
the complainant under sub-section (2) is the Registrar or a person authorised by the Central Government, 
the presence of such officer before the Court trying the offences shall not be necessary unless the court 
requires his personal attendance at the trial. 

(4) The provisions of sub-section (2) shall not apply to any action taken by the liquidator of a company 
in respect of any offence alleged to have been committed in respect of any of the matters in Chapter XX or 
in any other provision of this Act relating to winding up of companies. 

Explanation.—The liquidator of a company shall not be deemed to be an officer of the company within 

the meaning of sub-section (2). 

440. Transitional provisions.—Any offence committed under this Act, which is triable by a Special 
Court shall, until a Special Court is established, be tried by a 3[Court of Session or the Court of Metropolitan 
Magistrate or a Judicial Magistrate of the First Class, as the case may be] exercising jurisdiction over the 
area, notwithstanding anything contained in the Code of Criminal Procedure, 1973   (2 of 1974): 

Provided that nothing contained in this section shall affect the powers of the High Court under section 
407 of the Code to transfer any case or class of cases taken cognizance by a  1[Court of Session or the Court 
of Metropolitan Magistrate or a Judicial Magistrate of the First Class, as the case may be] under this section. 
441.  Compounding  of  certain  offences.—(1)  Notwithstanding  anything  contained  in  the  Code  of 
Criminal Procedure, 1973 (2 of 1974), any offence punishable under this Act (whether committed by a 
company or any officer thereof) 4[not being an offence punishable with imprisonment only, or punishable 
with imprisonment and also with fine], may, either before or after the institution of any prosecution, be 
compounded by— 

(a) the Tribunal; or 
(b) where the maximum amount of fine which may be imposed for such offence 5[does not exceed 
twenty-five lakh rupees], by the Regional Director or any officer authorised by the Central Government, 
on payment or credit, by the company or, as the case may be, the officer, to the Central Government of 

1. Subs. by Act 1 of 2018, s. 87 for “deemed to be a Court of Session”  (w.e.f. 7-5-2018). 
2. Ins. by Act 1 of 2018, s. 88 (w.e.f. 7-5-2018). 
3. Subs. by s. 89, ibid., for “Court of Session” (w.e.f. 7-5-2018).  
3. Subs. by s. 90, ibid., for “with fine only”(w.e.f. 9-2-2018). 
4. Subs. by Act 22 of 2019, s. 39, for “does not exceed five lakh rupees” (w.e.f. 2-11-2018). 

241 

 
                                                           
such sum as that Tribunal or the Regional Director or any officer authorised by the Central Government, 
as the case may be, may specify: 
Provided that the sum so specified shall not, in any case, exceed the maximum amount of the fine which 

may be imposed for the offence so compounded: 

Provided further that in specifying the sum required to be paid or credited for the compounding of an 
offence under this sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 
403 shall be taken into account: 

Provided also that any offence covered under this sub-section by any company or its officer shall not 
be compounded if the investigation against such company has been initiated or is pending under this Act. 
(2) Nothing in sub-section (1) shall apply to an offence committed by a company or its officer within a 
period of three years from the date on which a similar offence committed by it or him was compounded 
under this section. 

Explanation.—For the purposes of this section,— 

(a) any second or subsequent offence committed after the expiry of a period of three years from the 

date on which the offence was previously compounded, shall be deemed to be a first offence; 

(b)  “Regional  Director”  means  a  person  appointed  by  the  Central  Government  as  a  Regional 

Director for the purposes of this Act. 
(3) (a) Every application for the compounding of an offence shall be made to the Registrar who shall 
forward the same, together with his comments thereon, to the Tribunal or the Regional Director or any 
officer authorised by the Central Government, as the case may be. 

(b) Where any offence is compounded under this section, whether before or after the institution of any 
prosecution, an intimation thereof shall be given by the company to the Registrar within seven days from 
the date on which the offence is so compounded. 

(c) Where any offence is compounded before the institution of any prosecution, no prosecution shall be 
instituted in relation to such offence, either by the Registrar or by any share holder of the company or by 
any person authorised by the Central Government against the offender in relation to whom the offence is 
so compounded. 

(d)  Where  the  compounding  of  any  offence  is  made  after  the  institution  of  any  prosecution,  such 
compounding shall be brought by the Registrar in writing, to the notice of the court in which the prosecution 
is pending and on such notice of the compounding of the offence being given, the company or its officer in 
relation to whom the offence is so compounded shall be discharged. 

(4) The Tribunal or the Regional Director or any officer authorised by the Central Government, as the 
case may be, while dealing with a proposal for the compounding of an offence for a default in compliance 
with any provision of this Act which requires a company or its officer to file or register with, or deliver or 
send to, the Registrar any return, account or other document, may direct, by an order, if it or he thinks fit to 
do so, any officer or other employee of the company to file or register with, or on payment of the fee, and 
the additional fee, required to be paid under section 403, such return, account or other document within 
such time as may be specified in the order. 

1[(5) If any officer or other employee of the company who fails to comply with any order made by the 
Tribunal or the Regional Director or any officer authorised by the Central Government under sub-section 
(4), the maximum amount of fine for the offence proposed to be compounded under this section shall be 
twice the amount provided in the corresponding section in which punishment for such offence is provided.] 
2[(6) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), any 
offence which is punishable under this Act with imprisonment only or with imprisonment and also with 
fine shall not be compoundable.] 

(7) No offence specified in this section shall be compounded except under and in accordance with the 

provisions of this section. 

1. Subs. by Act 29 of 2020, s. 61, for sub-section (5) (w.e.f. 21-12-2020). 
2. Subs. by Act 22 of 2019, s. 39, for sub-section (6) (w.e.f. 2-11-2018). 

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442.  Mediation  and  Conciliation  Panel.—(1)  The  Central  Government  shall  maintain  a  panel  of 
experts to be called as the Mediation and Conciliation Panel consisting of such number of experts having 
such qualifications as may be prescribed for mediation between the parties during the pendency of any 
proceedings before the Central Government or the Tribunal or the Appellate Tribunal under this Act. 

(2) Any of the parties to the proceedings may, at any time during the proceedings before the Central 
Government or the Tribunal or the Appellate Tribunal, apply to the Central Government or the Tribunal or 
the Appellate Tribunal, as the case may be, in such form along with such fees as may be prescribed, for 
referring the matter pertaining to such proceedings to the Mediation and Conciliation Panel and the Central 
Government or the Tribunal or the Appellate Tribunal, as the case may be, shall appoint one or more experts 
from the panel referred to in sub-section (1). 

(3) The Central Government or the Tribunal or the Appellate Tribunal before which any proceeding is 
pending may, suo motu, refer any matter pertaining to such proceeding to such number of experts from the 
Mediation and Conciliation Panel as the Central Government or the Tribunal or the Appellate Tribunal, as 
the case may be, deems fit. 

(4) The fee and other terms and conditions of experts of the Mediation and Conciliation Panel shall be 

such as may be prescribed. 

(5) The Mediation and Conciliation Panel shall follow such procedure as may be prescribed and dispose 
of the matter referred to it within a period of three months from the date of such reference and forward its 
recommendations to the Central Government or the Tribunal or the Appellate Tribunal, as the case may be. 
(6)  Any  party  aggreived  by  the  recommendation  of  the  Mediation  and  Conciliation  Panel  may  file 

objections to the Central Government or the Tribunal or the Appellate Tribunal, as the case may be. 

443. Power of Central Government to appoint company prosecutors.—Notwithstanding anything 
contained  in  the  Code  of  Criminal  Procedure,  1973  (2  of  1974),  the  Central  Government  may  appoint 
generally, or for any case, or in any case, or for any specified class of cases in any local area, one or more 
persons, as company prosecutors for the conduct of prosecutions arising out of this Act and the persons so 
appointed as company prosecutors shall have all the powers and privileges conferred by the Code on Public 
Prosecutors appointed under section 24 of the Code. 

444.  Appeal  against  acquittal.—Notwithstanding  anything  contained  in  the  Code  of  Criminal 
Procedure, 1973 (2 of 1974), the Central Government may, in any case arising under this Act, direct any 
company prosecutor or authorise any other person either by name or by virtue of his office, to present an 
appeal from an order of acquittal passed by any court, other than a High Court, and an appeal presented by 
such prosecutor or other person shall be deemed to have been validly presented to the appellate court. 

445. Compensation for accusation without reasonable cause.—The provisions of section 250 of the 
Code of Criminal Procedure, 1973 (2 of 1974) shall apply mutatis mutandis to compensation for accusation 
without reasonable cause before the Special Court or the Court of Session. 

446. Application of fines.—The court imposing any fine under this Act may direct that the whole or 
any part thereof shall be applied in or towards payment of the costs of the proceedings, or in or towards the 
payment of a reward to the person on whose information the proceedings were instituted. 

1[446A. Factors for determining level of punishment.—The court or the Special Court, while deciding 

the amount of fine or imprisonment under this Act, shall have due regard to the following factors, namely:— 

(a) size of the company; 
(b) nature of business carried on by the company; 
(c) injury to public interest; 
(d) nature of the default; and 
(e) repetition of the default. 

2[446B. Lesser penalties for certain companies.—Notwithstanding anything contained in this Act, if 
penalty is payable for non-compliance of any of the provisions of this Act by a One Person Company, small 
company, start-up company or Producer Company, or by any of its officer in default, or any other person 
in respect of such company, then such company, its officer in default or any other person, as the case may 

1. Ins. by Act 1 of 2018, s. 91 (w.e.f. 9-2-2018). 
2. Subs. by Act 29 of 2020, s. 62, for section 446B (w.e.f. 22-1-2021). 

243 

 
                                                           
be,  shall  be  liable  to  a  penalty  which  shall  not  be  more  than  one-half  of  the  penalty  specified  in  such 
provisions subject to a maximum of two lakh rupees in case of a company and one lakh rupees in case of 
an officer who is in default or any other person, as the case may be. 

Explanation.—For the purposes of this section,— 

(a) “Producer Company” means a company as defined in clause (l) of section 378A; 

(b)  “start-up  company”  means  a  private  company  incorporated  under  this  Act  or  under  the 
Companies Act, 1956 (1 of 1956) and recognised as start-up in accordance with the notification issued 
by the Central Government in the Department for Promotion of Industry and Internal Trade.] 

CHAPTER XXIX 
MISCELLANEOUS 

447. Punishment for fraud.—Without prejudice to any liability including repayment of any debt under 
this  Actor  any  other  law  for  the  time  being  in  force,  any  person  who  is  found  to  be  guilty  of  fraud, 
1[involving an amount of at least ten lakh rupees or one per cent. of the turnover of the company, whichever 
is lower] shall be punishable with imprisonment for a term which shall not be less than six months but 
which  may  extend to ten  years  and shall also  be liable  to fine  which  shall  not  be  less than the  amount 
involved in the fraud, but which may extend to three times the amount involved in the fraud: 

Provided that where the fraud in question involves public interest, the term of imprisonment shall not 

be less than three years. 

2[Provided further that where the fraud involves an amount less than ten lakh 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 3[fifty lakh rupees] or with both.] 

Explanation.—For the purposes of this section— 

(i) “fraud”, in relation to affairs of a company or any body corporate, includes any act, omission, 
concealment of any fact or abuse of position committed by any person or any other person with the 
connivance  in  any  manner,  with  intent  to  deceive,  to  gain  undue  advantage  from,  or  to  injure  the 
interests of, the company or its shareholders or its creditors or any other person, whether or not there is 
any wrongful gain or wrongful loss; 

(ii) “wrongful gain” means the gain by unlawful means of property to which the person gaining is 

not legally entitled; 

(iii) “wrongful loss” means the loss by unlawful means of property to which the person losing is 

legally entitled. 
448. Punishment for false statement.— Save as otherwise provided in this Act, if in any return, report, 
certificate, financial statement, prospectus, statement or other document required by, or for, the purposes 
of any of the provisions of this Act or the rules made thereunder, any person makes a statement,— 

(a) which is false in any material particulars, knowing it to be false; or 
(b) which omits any material fact, knowing it to be material, 

he shall be liable under section 447. 

449.  Punishment  for  false  evidence.—Save  as  otherwise  provided  in  this  Act,  if  any  person 

intentionally gives false evidence— 

(a) upon any examination on oath or solemn affirmation, authorised under this Act; or 
(b) in any affidavit, deposition or solemn affirmation, in or about the winding up of any company 

under this Act, or otherwise in or about any matter arising under this Act, 

he shall be punishable with imprisonment for a term which shall not be less than three years but which may 
extend to seven years and with fine which may extend to ten lakh rupees. 

450.  Punishment  where  no  specific  penalty  or  punishment  is  provided.—If  a  company  or  any 
officer of a company or any other person contravenes any of the provisions of this Act or the rules made 

1. Ins. by Act 1 of 2018, s. 92 (w.e.f. 9-2-2018). 
2. The proviso ins. by s. 92, ibid. (w.e.f. 9-2-2018). 
3. Subs. by Act 22 of 2019, s. 41, for  “twenty lakh rupees” (w.e.f. 2-11-2018). 

244 

 
                                                           
thereunder,  or  any  condition,  limitation  or  restriction  subject  to  which  any  approval,  sanction,  consent, 
confirmation,  recognition, direction  or  exemption in relation  to  any  matter has  been accorded,  given  or 
granted, and for which no penalty or punishment is provided elsewhere in this Act, the company and every 
officer of the company who is in default or such other person shall be 1[liable to a penalty of ten thousand 
rupees, and in case of continuing contravention, with a further penalty of on thousand rupees for each day 
after the first during which the contravention continue, 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 or any other person]. 

451. Punishment in case of repeated default.—If a company or an officer of a company commits an 
offence punishable either with fine or with imprisonment and where the same offence is committed for the 
second or subsequent occasions within a period of three years, then, that company and every officer thereof 
who is in default shall be punishable with twice the amount of fine for such offence in addition to any 
imprisonment provided for that offence. 

452.  Punishment  for  wrongful  withholding  of  property.—(1)  If  any  officer  or  employee  of  a 

company— 

(a) wrongfully obtains possession of any property, including cash of the company; or 
(b) having any such property including cash in his possession, wrongfully withholds it or knowingly 
applies it for the purposes other than those expressed or directed in the articles and authorised by this 
Act,3 

he  shall,  on  the  complaint  of  the  company  or  of  any  member  or  creditor  or  contributory  thereof,  be 
punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees. 
(2) The Court trying an offence under sub-section (1) may also order such officer or employee to deliver 
up or refund, within a time to be fixed by it, any such property or cash wrongfully obtained or wrongfully 
withheld or knowingly misapplied, the benefits that have been derived from such property or cash or in 
default, to undergo imprisonment for a term which may extend to two years. 

2[Provided that the imprisonment of such officer or employee, as the case may be, shall not be ordered 
for wrongful possession or withholding of a dwelling unit, if the court is satisfied that the company has not 
paid to that officer or employee, as the case may be, any amount relating to-- 

(a) provident fund, pension fund, gratuity fund or any other fund for the welfare of its officers or 

employees, maintained by the company; 

(b) compensation or liability for compensation under the Workmen's Compensation Act, 1923 (19 

of 1923) in respect of death or disablement.] 
453. Punishment for improper use of “Limited” or “Private Limited”.—If any person or persons 
trade or carry on business under any name or title, of which the word  “Limited”  or the words  “Private 
Limited” or any contraction or imitation thereof is or are the last word or words, that person or each of those 
persons  shall,  unless  duly  incorporated  with  limited  liability,  or  unless  duly  incorporated  as  a  private 
company with limited liability, as the case may be, punishable with fine which shall not be less than five 
hundred rupees but may extend to two thousand rupees for every day for which that name or title has been 
used. 

454.  Adjudication  of  penalties.—(1)  The  Central  Government  may,  by  an  order  published  in  the 
Official Gazette, appoint as many officers of the Central Government, not below the rank of Registrar, as 
adjudicating  officers  for  adjudging  penalty  under  the  provisions  of  this  Act  in  the  manner  as  may  be 
prescribed. 

(2) The Central Government shall while appointing adjudicating officers, specify their jurisdiction in 

the order under sub-section (1). 

3[(3) The adjudicating officer may, by an order— 

(a) impose the penalty on the company, the officer who is in default, or any other person, as the 
case may be, stating therein any non-compliance or default under the relevant provisions of this Act; 
and 

4. Subs. by Act 29 of 2020, s. 63, for certain words (w.e.f. 21-12-2020). 
1. Ins. by Act 29 of 2020,  s. 64 (w.e.f. 22-1-2021). 
2. Subs. by Act 22 of 2019, s. 42, for sub-section (3) (w.e.f. 2-11-2018). 

245 

 
                                                           
(b) direct such company, or officer who is in default, or any other person, as the case may be, to 

rectify the default, wherever he considers fit.] 
1[Provided that in case the default relates to non-compliance of sub-section (4) of section 92 or sub-
section (1) or sub-section (2) of section 137 and such default has been rectified either prior to, or within 
thirty days of, the issue of the notice by the adjudicating officer, no penalty shall be imposed in this regard 
and all proceedings under this section in respect of such default shall be deemed to be concluded.] 

(4) The adjudicating officer shall, before imposing any penalty, give a reasonable opportunity of being 

heard to 2[such company, the officer who is in default or any other person]. 

(5) Any person aggrieved by an order made by the adjudicating officer under sub-section (3) may prefer 

an appeal to the Regional Director having jurisdiction in the matter. 

(6) Every appeal under sub-section (5) shall be filed within sixty days from the date on which the copy 
of the order made by the adjudicating officer is received by the aggrieved person and shall be in such form, 
manner and be accompanied by such fees as may be prescribed. 

(7) The Regional Director may, after giving the parties to the appeal an opportunity of being heard, 

pass such order as he thinks fit, confirming, modifying or setting aside the order appealed against. 

(8) (i) Where company 3[fails to comply with the order made under sub-section (3) or sub-section (7), 
as the case may be,] within a period of ninety days from the date of the receipt of the copy of the order, the 
company shall be punishable with fine which shall not be less than twenty-five thousand rupees but which 
may extend to five lakh rupees. 

(ii) 4[Where an officer of a company or any other person] who is in default 5[fails to comply with the 
order made under sub-section (3) or sub-section (7), as the case may be,] within a period of ninety days 
from the date of the receipt of the copy of the order, such officer shall be punishable with imprisonment 
which may extend to six months or with fine which shall not be less than twenty-five thousand rupees but 
which may extend to one lakh rupees, or with both. 

6[454A.Penalty for repeated default.—Where a company or an officer of a company or any other 
person having already been subjected to penalty for default under any provisions of this Act, again commits 
such default within a period of three years from the date of order imposing such penalty passed by the 
adjudicating officer or the Regional Director, as the case may be, it or he shall be liable for the second or 
subsequent defaults for an amount equal to twice the amount of penalty provided for such default under the 
relevant provisions of this Act.] 

455. Dormant company.—(1) Where a company is formed and registered under this Act for a future 
project or to hold an asset or intellectual property and has no significant accounting transaction, such a 
company  or  an  inactive  company  may  make  an  application  to  the  Registrar  in  such  manner  as  may  be 
prescribed for obtaining the status of a dormant company. 

Explanation.—For the purposes of this section,— 

(i) “inactive company” means a company which has not been carrying on any business or operation, 
or has not made any significant accounting transaction during the last two financial years, or has not 
filed financial statements and annual returns during the last two financial years; 

(ii) “significant accounting transaction” means any transaction other than— 

(a) payment of fees by a company to the Registrar; 

(b) payments made by it to fulfil the requirements of this Act or any other law; 

(c) allotment of shares to fulfil the requirements of this Act; and 

(d) payments for maintenance of its office and records. 

3. Ins. by Act 29 of 2020, s. 65 (w.e.f. 22-1-2021). 
1. Subs. by Act 22 of 2019,  s. 42, for “such company and the officer who is in default” (w.e.f. 2-11-2018). 
2. Subs. by s. 42, ibid., for “does not pay the penalty imposed by the adjudicating officer or the Regional Director” (w.e.f. 2-11-

2018). 

3. The words “Where an officer of a company or any other person” omitted by s. 42, ibid., (w.e.f. 2-11-2018). 
4. The words “does not pay the penalty” omitted by s. 42, ibid. (w.e.f.. 2-11-2018). 
5. Ins. by s. 43, ibid. (w.e.f. 2-11-2018). 

246 

 
                                                           
(2) The Registrar on consideration of the application shall allow the status of a dormant company to the 

applicant and issue a certificate in such form as may be prescribed to that effect. 

(3) The Registrar shall maintain a register of dormant companies in such form as maybe prescribed. 

(4) In case of a company which has not filed financial statements or annual returns for two financial 
years consecutively, the Registrar shall issue a notice to that company and enter the name of such company 
in the register maintained for dormant companies. 

(5) A dormant company shall have such minimum number of directors, file such documents and pay 
such annual fee as may be prescribed to the Registrar to retain its dormant status in the register and may 
become an active company on an application made in this behalf accompanied by such documents and fee 
as may be prescribed. 

(6)  The  Registrar  shall  strike  off  the  name  of  a  dormant  company  from  the  register  of  dormant 

companies, which has failed to comply with the requirements of this section. 

456. Protection of action taken in good faith.—No suit, prosecution or other legal proceeding shall 
lie against the Government or any officer of the Government or any other person in respect of anything 
which is in good faith done or intended to be done in pursuance of this Act or of any rules or orders made 
thereunder, or in respect of the publication by or under the authority of the Government or such officer, of 
any report, paper or proceedings. 

457. Non-disclosure of information in certain cases.—Notwithstanding anything contained in any 
other law for the time being in force, the Registrar, any officer of the Government or any other person shall 
not be compelled to disclose to any court, Tribunal or other authority, the source from where he got any 
information which— 

(a) has led the Central Government to order an investigation under section 210; or 

(b) is or has been material or relevant in connection with such investigation. 

458. Delegation by Central Government of its powers and functions.—(1) The Central Government 
may, by notification, and subject to such conditions, limitations and restrictions as may be specified therein, 
delegate any of its powers or functions under this Act other than the power to make rules to such authority 
or officer as may be specified in the notification: 

1* 
 (2) A copy of every notification issued under sub-section (1) shall, as soon as may be after it is issued, 

* 

* 

* 

* 

be laid before each House of Parliament. 

459. Powers of Central Government of Tribunal to accord approval, etc., subject to conditions 
and to prescribe fees on applications.—(1) Where the Central Government or the Tribunal is required or 
authorised by any provision of this Act— 

(a)  to  accord  approval,  sanction,  consent,  confirmation  or  recognition  to,  or  in  relation  to,  any 

matter; or 

(b) to give any direction in relation to any matter; or 

(c) to grant any exemption in relation to any matter, 

then, the Central Government or the Tribunal may in the absence of anything to the contrary contained in 
that provision or any other provision of this Act, accord, give or grant such approval, sanction, consent, 
confirmation, recognition, direction or exemption, subject to such conditions, limitations or restrictions as 
it  may  think  fit  to  impose and  may,  in  the  case  of  a contravention  of  any  such  condition,  limitation  or 
restriction, rescind or withdraw such approval, sanction, consent, confirmation, recognition, direction or 
exemption. 

(2) Save as otherwise provided in this Act, every application which may be, or is required to be, made 

to the Central Government or the Tribunal under any provision of this Act— 

(a) in respect of any approval, sanction, consent, confirmation or recognition to be accorded by that 

Government or the Tribunal to, or in relation to, any matter; or 

1. The proviso omitted by Act 1 of 2018, s. 93 (w.e.f. 9-2-2018). 

247 

 
 
 
 
 
 
 
 
                                                           
(b)  in  respect  of  any  direction  or  exemption  to  be  given  or  granted  by  that  Government  or  the 

Tribunal in relation to any matter; or 

(c) in respect of any other matter, 

shall be accompanied by such fees as may be prescribed: 

Provided that different fees may be prescribed for applications in respect of different matters or in case 

of applications by different classes of companies. 

460. Condonation of delay in certain cases.—Notwithstanding anything contained in this Act,— 

(a) where any application required to be made to the Central Government under any provision of 
this Act in respect of any matter is not made within the time specified therein, that Government may, 
for reasons to be recorded in writing, condone the delay; and 

(b) where any document required to be filed with the Registrar under any provision of this Act is 
not filed within the time specified therein, the Central Government may, for reasons to be recorded in 
writing, condone the delay. 
461. Annual report by Central Government.—The Central Government shall cause a general annual 
report on the working and administration of this Act to be prepared and laid before each House of Parliament 
within one year of the close of the year to which the report relates. 

462. Power to exempt class or classes of companies from provisions of this Act.—(1) The Central 

Government may in the public interest, by notification direct that any of the provisions of this Act,— 

(a) shall not apply to such class or classes of companies; or 
(b)  shall  apply  to  the  class  or  classes  of  companies  with  such  exceptions,  modifications  and 

adaptations as may be specified in the notification. 
1[(2) A copy of every notification proposed to be issued under sub-section (1), shall be laid in draft 
before each House of Parliament, while it is in session, for a total period of thirty days, and if, both Houses 
agree in  disapproving  the  issue  of  notification  or  both  Houses agree in  making  any  modification in the 
notification, the notification shall not be issued or, as the case may be, shall be issued only in such modified 
form as may be agreed upon by both the Houses. 

(3) In reckoning any such period of thirty days as is referred to in sub-section (2), no account shall be 
taken of any period during which the House referred to in sub-section (2) is prorogued or adjourned for 
more than four consecutive days. 

(4) The copies of every notification issued under this section shall, as soon as may be after it has been 

issued, be laid before each House of Parliament.] 

463. Power of court to grant relief in certain cases.—(1) If in any proceeding for negligence, default, 
breach of duty, misfeasance or breach of trust against an officer of a company, it appears to the court hearing 
the case that he is or may be liable in respect of the negligence, default, breach of duty, misfeasance or 
breach of trust, but that he has acted honestly and reasonably, and that having regard to all the circumstances 
of the case, including those connected with his appointment, he ought fairly to be excused, the court may 
relieve him, either wholly or partly, from his liability on such term, as it may think fit: 

Provided that in a criminal proceeding under this sub-section, the court shall have no power to grant 
relief from any civil liability which may attach to an officer in respect of such negligence, default, breach 
of duty, misfeasance or breach of trust. 

(2) Where any such officer has reason to apprehend that any proceeding will or might be brought against 
him in respect of any negligence, default, breach of duty, misfeasance or breach of trust, he may apply to 
the High Court for relief and the High Court on such application shall have the same power to relieve him 
as it would have had if it had been a court before which a proceedings against that officer for negligence, 
default, breach of duty, misfeasance or breach of trust had been brought under sub-section (1). 

(3) No court shall grant any relief to any officer under sub-section (1) or sub-section (2) unless it has, 
by notice served in the manner specified by it, required the Registrar and such other person, if any, as it 
thinks necessary, to show cause why such relief should not be granted. 

1. Subs. by Act 21 of 2015, s. 23, for sub-section (2) (w.e.f. 29-5-2015). 

248 

 
                                                           
464.  Prohibition  of  association  or  partnership  of  persons  exceeding  certain  number.—(1)  No 
association or partnership consisting of more than such number of persons as may be prescribed shall be 
formed for the purpose of carrying on any business that has for its object the acquisition of gain by the 
association or partnership or by the individual members thereof, unless it is registered as a company under 
this Act or is formed under any other law for the time being in force: 

Provided that the number of persons which may be prescribed under this sub-section shall not exceed 

one hundred. 

(2) Nothing in sub-section (1) shall apply to— 

(a) a Hindu undivided family carrying on any business; or 
(b) an association or partnership, if it is formed by professionals who are governed by special Acts. 
(3) Every member of an association or partnership carrying on business in contravention of                 sub-
section (1) shall be punishable with fine which may extend to one lakh rupees and shall also be personally 
liable for all liabilities incurred in such business. 

465. Repeal of certain enactments and savings.—(1) The Companies Act, 1956 (1 of 1956) and the 
Registration of Companies (Sikkim) Act, 1961 (Sikkim Act 8 of 1961) (hereafter in this section referred to 
as the repealed enactments) shall stand repealed: 
* 

1* 
2[Provided that] until a date is notified by the Central Government under sub-section (1) of Section 434 
for transfer of all matters, proceedings or cases to the Tribunal, the provisions of the Companies Act, 1956 
(1 of 1956) in regard to the jurisdiction, powers, authority and functions of the Board of Company Law 
Administration and court shall continue to apply as if the Companies Act, 1956 has not been repealed: 

* 

* 

* 

3[Provided further that] provisions of the Companies Act, 1956 (1 of 1956) referred in the notification 
issued under section 67 of the Limited Liability Partnership Act, 2008 (6 of 2009) shall, until the relevant 
notification under such section applying relevant corresponding provisions of this Act to limited liability 
partnerships is issued, continue to apply as if the Companies Act, 1956 has not been repealed. 

(2) Notwithstanding the repeal under sub-section (1) of the repealed enactments,— 

(a) anything done or any action taken or purported to have been done or taken, including any rule, 
notification, inspection, order or notice made or issued or any appointment or declaration made or any 
operation  undertaken  or  any  direction  given  or  any  proceeding  taken  or  any  penalty,  punishment, 
forfeiture or fine imposed under the repealed enactments shall, insofar as it is not inconsistent with the 
provisions of this Act, be deemed to have been done or taken under the corresponding provisions of 
this Act; 

(b) subject to the provisions of clause (a), any order, rule, notification, regulation, appointment, 
conveyance, mortgage, deed, document or agreement made, fee directed, resolution passed, direction 
given, proceeding taken, instrument executed or issued, or thing done under or in pursuance of any 
repealed enactment shall, if in force at the commencement of this Act, continue to be in force, and shall 
have effect as if made, directed, passed, given, taken, executed, issued or done under or in pursuance 
of this Act; 

(c) any principle or rule of law, or established jurisdiction, form or course of pleading, practice or 
procedure  or  existing  usage,  custom,  privilege,  restriction  or  exemption  shall  not  be  affected, 
notwithstanding that the same respectively may have been in any manner affirmed or recognised or 
derived by, in, or from, the repealed enactments; 

(d) any person appointed to any office under or by virtue of any repealed enactment shall be deemed 

to have been appointed to that office under or by virtue of this Act; 

(e) any jurisdiction, custom, liability, right, title, privilege, restriction, exemption, usage, practice, 

procedure or other matter or thing not in existence or in force shall not be revised or restored; 

(f) the offices existing on the commencement of this Act for the registration of companies shall 

continue as if they have been established under the provisions of this Act; 

1. The first proviso omitted by Act 29 of 2020, s. 66 (w.e.f. 11-2-2021). 
2. Subs. by s. 66, ibid., for “Provided further that” (w.e.f. 11-2-2021). 
3. Subs. by s.66, ibid., for “Provided also that” (w.e.f. 11-2-2021). 

249 

 
 
 
 
 
 
 
 
                                                           
(g) the incorporation of companies registered under the repealed enactments shall continue to be 
valid and the provisions of this Act shall apply to such companies as if they were registered under this 
Act; 

(h) all registers and all funds constituted and established under the repealed enactments shall be 
deemed to be registers and funds constituted or established under the corresponding provisions of this 
Act; 

(i) any prosecution instituted under the repealed enactments and pending immediately before the 
commencement of this Act before any Court shall, subject to the provisions of this Act, continue to be 
heard and disposed of by the said Court; 

(j)  any  inspection,  investigation  or  inquiry  ordered  to  be  done  under  the  Companies  Act,  1956           

(1 of 1956) shall continue to be proceeded with as if such inspection, investigation or inquiry has been 
ordered under the corresponding provisions of this Act; and 

(k)  any  matter  filed  with  the  Registrar,  Regional  Director  or the  Central  Government  under  the 
Companies Act, 1956 (1 of 1956) before the commencement of this Act and not fully addressed at that 
time shall be concluded by the Registrar, Regional Director or the Central Government, as the case may 
be, in terms of that Act, despite its repeal. 
(3)  The  mention  of  particular  matters  in  sub-section  (2)  shall  not  be  held  to  prejudice  the  general 
application of section 6 of the General Clauses Act, 1897 (10 of 1897) with regard to the effect of repeal of 
the repealed enactments as if the Registration of Companies (Sikkim) Act, 1961 (Sikkim Act 8 of 1961) 
were also a Central Act. 

466.  Dissolution  of  Company  Law  Board  and  consequential  provisions.—(1)  Notwithstanding 
anything  contained  in  section  465,  the  Board  of  Company  Law  Administration  constituted  under  the 
Companies Act, 1956 (1 of 1956) (hereafter in this section referred to as the Company Law Board) shall 
stand dissolved on the constitution of the Tribunal and the Appellate Tribunal: 

Provided that until the Tribunal and the Appellate Tribunal is constituted, the Chairman,                     Vice-
Chairman and Members of the Company Law Board immediately before the constitution of the Tribunal 
and the Appellate Tribunal, who fulfil the qualifications and requirements provided under this Act regarding 
appointment  as  President  or  Chairperson  or  Member  of  the  Tribunal  or  the  Appellate  Tribunal,  shall 
function as President, Chairperson or Member of the Tribunal or the Appellate Tribunal: 

Provided further that every officer or other employee, who had been appointed on deputation basis to 

the Company Law Board, shall, on such dissolution,— 

(i)  become  officer  or  employee  of  the  Tribunal  or  the  Appellate  Tribunal,  if  he  fulfils  the 

qualifications and requirements under this Act; and 

(ii) stand reverted to his parent cadre, Ministry or Department, in any other case: 

Provided also that  every  officer  and  the other employee  of the  Company  Law  Board, employed  on 
regular basis by that Board, shall become, on and from such dissolution the officer and other employee, 
respectively, of the Tribunal or the Appellate Tribunal with the same rights and privileges as to pension, 
gratuity and other like benefits as would have been admissible to him if he had continued to serve that 
Board and shall continue to do so unless and until his employment in the Tribunal or the Appellate Tribunal 
is duly terminated or until his remuneration, terms and conditions of employment are duly altered by the 
Tribunal or the Appellate Tribunal, as the case may be: 

Provided also that notwithstanding anything contained in the Industrial Disputes Act, 1947              (14 
of 1947) or in any other law for the time being in force, any officer or other employee who becomes an 
officer or other employee of the Tribunal or the Appellate Tribunal under the preceding proviso shall not 
be entitled to any compensation under this Act or under any other law for the time being in force and no 
such claim shall be entertained by any court, tribunal or other authority: 

Provided also that where the Company Law Board has established a provident fund, superannuation 
fund, welfare fund or other fund for the benefit of the officers and other employees employed in that Board, 
the monies relatable to the officers and other employees who have become officers or employees of the 
Tribunal or the Appellate Tribunal shall, out of the monies standing to the credit of such provident fund, 
superannuation  fund,  welfare  fund  or  other  fund,  stand  transferred  to,  and  vest  in,  the  Tribunal  or  the 

250 

 
Appellate Tribunal, as the case may be, and such monies which stand so transferred shall be dealt with by 
the Tribunal or the Appellate Tribunal in such manner as may be prescribed. 

(2) The persons holding the offices of Chairman, Vice-Chairman and Members, and officers and other 
employees  of  the  Company  Law  Board  immediately  before  the  constitution  of  the  Tribunal  and  the 
Appellate Tribunal who are not covered under proviso to sub-section(1) shall vacate their respective offices 
on such constitution and no such Chairman, Vice-Chairman and Members and officers or other employees 
shall be entitled to claim any compensation for the premature termination of the term of his office or of any 
contract of service, if any. 

467.  Power  of  Central  Government  to  amend  Schedules.—(1)  Subject  to  the  provisions  of  this 
section, the Central Government may, by notification, alter any of the regulations, rules, Tables, forms and 
other provisions contained in any of the Schedules to this Act. 

(2) Any alteration notified under sub-section (1) shall have effect as if enacted in this Act and shall 

come into force on the date of the notification, unless the notification otherwise directs: 

Provided that no such alteration in Table F of Schedule I shall apply to any company registered before 

the date of such alteration. 

(3) Every alteration made by the Central Government under sub-section (1) shall be laid as soon as may 
be after it is made before each House of Parliament while it is in session for a total period of thirty days 
which may be comprised in one session or in two or more successive sessions, and if, before the expiry of 
the session immediately following the session or the successive sessions aforesaid, both Houses agree in 
making any modification in the alteration, or both Houses agree that the alteration should not be made, the 
alteration shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, 
however, that any such modification or annulment shall be without prejudice to the validity of anything 
previously done in pursuance of that alteration. 

468.  Powers  of  Central  Government  to  make  rules  relating  to  winding  up.—(1)  The  Central 
Government shall, make rules consistent with the Code of Civil Procedure, 1908 (5 of 1908) providing for 
all matters relating to the winding up of companies, which by this Act, are to be prescribed, and may make 
rules providing for all such matters, as may be prescribed. 

1[(2)  In  particular,  and  without  prejudice  to  the  generality  of  the  foregoing  power,  such  rules  may 

provide for all or any of the following matters, namely:— 

(i) as to the mode of proceedings to be held for winding up of a company by the Tribunal under 

this Act; 

(ii) for the holding of meetings of creditors and members in connection with proceedings under 

section 230; 

(iii) for giving effect to the provisions of this Act as to the reduction of the capital; 
(iv) generally for all applications to be made to the Tribunal under the provisions of this Act; 
(v) the holding and conducting of meetings to ascertain the wishes of creditors and contributories; 
(vi)  the  settling  of  lists  of  contributories  and  the  rectifying  of  the  register  of  members  where 

required, and collecting and applying the assets; 

(vii) the payment, delivery, conveyance, surrender or transfer of money, property, books or papers 

to the liquidator; 

(viii) the making of calls; and 

(ix) the fixing of a time within which debts and claims shall be proved.] 

(3) All rules made by the Supreme Court on the matters referred to in this section as it stood immediately 
before the commencement of this Act and in force at such commencement, shall continue to be in force, till 
such time the rules are made by the Central Government and any reference to the High Court in relation to 
winding up of a company in such rules shall be construed as a reference to the Tribunal. 

469.  Power  of  Central  Government  to  make  rules.—(1)  The  Central  Government  may,  by 

notification, make rules for carrying out the provisions of this Act. 

1. Subs. by Act 31 of 2016, s. 255 and the Eleventh Schedule, for sub-section (2) (w.e.f. 15-11-2016). 

251 

 
                                                           
(2) Without prejudice to the generality of the provisions of sub-section (1), the Central Government 
may make rules for all or any of the matters which by this Act are required to be, or may be, prescribed or 
in respect of which provision is to be or may be made by rules. 

(3) Any rule made under sub-section (1) may provide that a contravention thereof shall be punishable 
with fine which may extend to five thousand rupees and where the contravention is a continuing one, with 
a  further  fine  which  may  extend  to  five  hundred  rupees for  every  day  after the first  during  which such 
contravention continues. 

(4) Every rule made under this section and every regulation made by Securities and Exchange Board 
under this Act, shall be laid, as soon as may be after it is made, before each House of Parliament, while it 
is in session, for a total period of thirty days which may be comprised in one session or in two or more 
successive  sessions,  and  if,  before  the  expiry  of  the  session  immediately  following  the  session  or  the 
successive sessions aforesaid, both Houses agree in making any modification in the rule or regulation or 
both Houses agree that the rule or regulation should not be made, the rule or regulation shall thereafter have 
effect  only  in  such  modified  form  or  be  of  no  effect,  as  the  case  may  be;  so,  however,  that  any  such 
modification or annulment shall be without prejudice to the validity of anything previously done under that 
rule or regulation. 

470. Power to remove difficulties.—(1) If any difficulty arises in giving effect to the provisions of 
this Act, the Central Government may, by order published in the Official Gazette, make such provisions, 
not inconsistent with the provisions of this Act, as appear to it to be necessary or expedient for removing 
the difficulty: 

Provided that no such order shall be made after the expiry of a period of five years from the date of 

commencement of section 1 of this Act. 

(2) Every order made under this section shall, as soon as may be after it is made, be laid before each 

House of Parliament. 

252 

 
 
 
TABLE –A 

SCHEDULE I 

(See sections 4 and 5) 

1st 

2nd 

3rd 

4th 

5th 

MEMORANDUM OF ASSOCIATION OF A COMPANY LIMITED BY SHARES 

The name of the company is “..................................Limited / Private Limited”. 

The registered office of the company will be situated in the State of................................... 

(a) The objects to be pursued by the company on its incorporation are:— 

(b) Matters which are necessary for furtherance of the objects specified in clause 3(a) are:— 

The liability of the member(s) is limited and this liability is limited to the amount unpaid, if any, 
on the shares held by them. 

share 

The 
into..................................shares of..................................rupees each. 

company 

capital 

the 

of 

is..................................rupees, 

divided 

6th  We, the several persons, whose names and addresses are subscribed, are desirous of being formed 
into a company in pursuance of this memorandum of association, and we respectively agree to take 
the number of shares in the capital of the company set against our respective names:— 

Names, addresses, 
descriptions and 
occupations of subscribers 

No. of Shares taken 
by each subscriber 

Signature of 
subscriber 

Signature, names, addresses, 
descriptions and occupations 
of witnesses 

Signed before me: 

Signature...................... 

Signed before me: 

Signature...................... 

Signed before me: 

Signature...................... 

Signed before me: 

Signature...................... 

Signed before me: 

Signature...................... 

Signed before me: 

Signature...................... 

Signed before me: 

Signature...................... 

A.B. of........Merchant 

.............. 

C.D. of........Merchant 

.............. 

E.F. of........Merchant 

.............. 

G.H. of........Merchant 

.............. 

I.J. of........Merchant 

.............. 

K.L. of........Merchant 

.............. 

M.N. of........Merchant 

.............. 

Total shares taken: 

_____________ 

_____________ 

253 

 
 
 
 
 
 
 
 
 
 
 
 
7th 

I,  whose  name  and  address  is  given  below,  am  desirous  of  forming  a  company  in  pursuance  of  this 
memorandum of association and agree to take all the shares in the capital of the company (Applicable in case 
of one person company):— 

Name, address, description 
and occupation of 
subscriber 

A.B. ........Merchant 

Signature of subscriber 

Signature, name, address, description 
and occupation of witness 

Signed before me: 

Signature...................... 

8th 

Shri/Smt..................,  son/daughter  of  .......................,  resident  of............  aged............  years  shall  be  the 
nominee in the event of death of the sole member (Applicable in case of one person company) 

Dated........................................ the day of .......................... 

TABLE –B 

MEMORANDUM OF ASSOCIATION OF A COMPANY LIMITED BY 

GUARANTEE AND NOT HAVING A SHARE CAPITAL 

The name of the company is “..................................Limited/Private Limited”. 

The registered office of the company will be situated in the State of.................................. 

(a) The objects to be pursued by the company on its incorporation are:— 

(b) Matters which are necessary for furtherance of the objects specified in clause 3(a) are:— 

The liability of the member(s) is limited. 

Every member of the company undertakes to contribute: 

1st 

2nd 

3rd 

4th 

5th 

(i) to the assets of the company in the event of its being wound up while he is a member, or within one year 
after he ceases to be a member, for payment of the debts and liabilities of the company or of such debts and 

liabilities as may have been contracted before he ceases to be a member; and 

(ii) to the costs, charges and expenses of winding up (and for the adjustment of the rights of the contributories 
among themselves), 

such amount as may be required, not exceeding..................................rupees. 

6th  We, the  several persons,  whose names  and  addresses are subscribed,  are  desirous  of  being  formed  into  a 
company in pursuance of this memorandum of association. 

Names, addresses, descriptions 
and occupations of subscribers 

Signature of subscriber 

Signature, names, addresses, 
descriptions and occupations of 
witnesses 

A.B. of........Merchant 

C.D. of........Merchant 

E.F. of........Merchant 

G.H. of........Merchant 

Signed before me: 

Signature...................... 

Signed before me: 

Signature...................... 

Signed before me: 

Signature...................... 

Signed before me: 

Signature...................... 

254 

 
 
 
 
 
 
 
 
 
 
 
I.J. of........Merchant 

K.L. of........Merchant 

M.N. of........Merchant 

Signed before me: 

Signature...................... 

Signed before me: 

Signature...................... 

Signed before me: 

Signature...................... 

I,  whose  name  and  address  is  given  below,  am  desirous  of  forming  a  company  in  pursuance  of  this 

7th 
memorandum of association (Applicable in case of one person company):— 

Name,  address,  description 
and occupation of subscriber 

A.B. ........Merchant 

Signature of subscriber 

Signature,  name,  address,  description 
and occupation of witness 

Signed before me: 

Signature...................... 

8th 

Shri/Smt............., son/daughter of .................., resident of............ aged............ years shall be the nominee in 
the event of death of the sole member (Applicable in case of one person company) 

Dated............................ the day of .............................. 

TABLE -C 

MEMORANDUM OF ASSOCIATION OF A COMPANY LIMITED BY 
GUARANTEE AND HAVING A SHARE CAPITAL 

The name of the company is “..................................Limited/Private Limited”. 

The registered office of the company will be situated in the State of.................................. 

(a) The objects to be pursued by the company on its incorporation are:— 

(b) Matters which are necessary for furtherance of the objects specified in clause 3(a) are:— 

The liability of the member(s) is limited. 

Every member of the company undertakes to contribute: 

1st 

2nd 

3rd 

4th 

5th 

(i) to the assets of the company in the event of its being wound up while he is a member, or within one year 
after he ceases to be a member, for payment of the debts and liabilities of the company or of such debts and 
liabilities as may have been contracted before he ceases to be a member; and 

(ii) to the costs, charges and expenses of winding up (and for the adjustment of the rights of the contributories 
among themselves), 

such amount as may be required, not exceeding..................................rupees. 

6th 

The  share  capital  of  the  company  is..................................rupees,  divided  into..................................shares 
of..................................rupees each 

7th  We, the several persons, whose names, addresses are subscribed, are desirous of being formed into a company 
in pursuance of this memorandum of association and we respectively agree to take the number of shares in 
the capital of the company set against our respective names:— 

255 

 
 
 
 
 
 
 
 
 
Names, addresses, 
descriptions and 
occupations of subscribers 
A.B. of........Merchant 

No. of Shares taken 
by each subscriber 

Signature of 
subscriber 

.............. 

C.D. of........Merchant 

.............. 

E.F. of........Merchant 

.............. 

G.H. of........Merchant 

.............. 

I.J. of........Merchant 

.............. 

K.L. of........Merchant 

.............. 

M.N. of........Merchant 

.............. 

Signature, names, addresses, 
descriptions and occupations 
of witnesses 
Signed before me: 
Signature...................... 
Signed before me: 
Signature...................... 
Signed before me: 
Signature...................... 
Signed before me: 
Signature...................... 
Signed before me: 
Signature...................... 
Signed before me: 
Signature...................... 
Signed before me: 
Signature...................... 

8th 

I,  whose  name  and  address  is  given  below,  am  desirous  of  forming  a  company  in  pursuance  of  this 
memorandum of association and agree to take all the shares in the capital of the company (Applicable in case 
of one person company):— 

Name,  address,  description 
and occupation of subscriber 
A.B. of ........Merchant 

Signature of subscriber 

Signature,  name,  address,  description 
and occupation of witness 
Signed before me: 
Signature...................... 

9th 

Shri/Smt.............., son/daughter of .................., resident of............ aged............ years shall be the nominee in 
the event of death of the sole member (Applicable in case of one person company) 

Dated............................ the day of........................... 

TABLE -D 

MEMORANDUM OF ASSOCIATION OF AN UNLIMITED COMPANY 

AND NOT HAVING SHARE CAPITAL 

1st 

The name of the company is “..................................Company”. 

2nd 

The registered office of the company will be situated in the State of.................................. 

3rd 

(a) The objects to be pursued by the company on its incorporation are:— 

(b) Matters which are necessary for furtherance of the objects specified in clause 3(a) are:— 

4th 

The liability of the member(s) is unlimited. 

5th  We,  the  several  persons,  whose  names  and  addresses  are  subscribed  are  desirous  of  being  formed  into  a 

company in pursuance of this memorandum of association. 

256 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Names, addresses, descriptions 
and occupations of subscribers 

Signature of subscriber 

Signature, names, addresses, 
descriptions and occupations of 
witness 

A.B. of........Merchant 

C.D. of........Merchant 

E.F. of........Merchant 

G.H. of........Merchant 

I.J. of........Merchant 

K.L. of........Merchant 

M.N. of........Merchant 

Signed before me: 

Signature...................... 

Signed before me: 

Signature...................... 

Signed before me: 

Signature...................... 

Signed before me: 

Signature...................... 

Signed before me: 

Signature...................... 

Signed before me: 

Signature...................... 

Signed before me: 

Signature...................... 

6th 

I,  whose  name  and  address  is  given  below,  am  desirous  of  forming  a  company  in  pursuance  of  this 
memorandum of association (Applicable in case of one person company):— 

Name,  address,  description 
and occupation of subscriber 

A.B. ........Merchant 

Signature of subscriber 

Signature,  name,  address,  description 
and occupation of witness 

Signed before me: 

Signature...................... 

7th 

Shri/Smt.........., son/daughter of ....................., resident of............ aged............ years shall be the nominee in 
the event of death of the sole member (Applicable in case of one person company) 

Dated...................... the day of.................... 

TABLE -E 

MEMORANDUM OF ASSOCIATION OF AN UNLIMITED COMPANY 
AND HAVING SHARE CAPITAL 

1st 

2nd 

3rd 

The name of the company is “..................................Company”. 

The registered office of the company will be situated in the State of................................... 

(a) The objects to be pursued by the company on its incorporation are:— 

(b) Matters which are necessary for furtherance of the objects specified in clause 3(a) are:— 

257 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4th 

5th 

The liability of the member(s) is unlimited. 

The  share  capital  of  the  company  is..................................rupees,  divided  into..................................shares 
of..................................rupees each. 

6th  We, the several persons, whose names, and addresses are subscribed, are desirous of being formed into a 
company in pursuance of this memorandum of association and we respectively agree to take the number of 
shares in the capital of the company set against our respective names:— 

Names, addresses, 
descriptions and 
occupations of subscribers 

No. of Shares taken 
by each subscriber 

Signature of 
subscriber 

Signature, names, addresses, 
descriptions and occupations 
of witnesses 

A.B. of........Merchant 

.............. 

C.D. of........Merchant 

.............. 

E.F. of........Merchant 

.............. 

G.H. of........Merchant 

.............. 

I.J. of.........Merchant 

.............. 

K.L. of........Merchant 

.............. 

M.N. of........Merchant 

.............. 

Signed before me: 

Signature...................... 

Signed before me: 

Signature...................... 

Signed before me: 

Signature...................... 

Signed before me: 

Signature...................... 

Signed before me: 

Signature...................... 

Signed before me: 

Signature...................... 

Signed before me: 

Signature...................... 

7th 

I,  whose  name  and  address  is  given  below,  am  desirous  of  forming  a  company  in  pursuance  of  this 
memorandum of association and agree to take all the shares in the capital of the company (Applicable in case 
of one person company):— 

Name,  address,  description 
and occupation of subscriber 

A.B. ........Merchant 

Signature of subscriber 

Signature,  name,  address,  description 
and occupation of witness 

Signed before me: 

Signature...................... 

8th 

Shri/Smt..........., son/daughter of ...................., resident of............ aged............ years shall be the nominee in 
the event of death of the sole member (Applicable in case of one person company) 

Dated.............................. the day of ............................. 

258 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TABLE -F 

ARTICLES OF ASSOCIATION OF A COMPANY LIMITED BY SHARES 

Interpretation 

I. (1) In these regulations— 

(a) “the Act” means the Companies Act, 2013, 

(b) “the seal” means the common seal of the company. 

(2) Unless the context otherwise requires, words or expressions contained in these regulations shall bear the same 
meaning as in the Act or any statutory modification thereof in force at the date at which these regulations become 
binding on the company. 

Share capital and variation of rights 

II. 1. Subject to the provisions of the Act and these Articles, the shares in the capital of the company shall be 
under  the  control  of  the  Directors  who  may  issue, allot  or  otherwise  dispose  of the same  or  any  of  them  to  such 
persons, in such proportion and on such terms and conditions and either at a premium or at par and at such time as 
they may from time to time think fit. 

2. (i) Every person whose name is entered as a member in the register of members shall be entitled to receive 
within two months after incorporation, in case of subscribers to the memorandum or after allotment or within one 
month after the application for the registration of transfer or transmission or within such other period as the conditions 
of issue shall be provided,— 

(a) one certificate for all his shares without payment of any charges; or 

(b) several certificates, each for one or more of his shares, upon payment of twenty rupees for each certificate 

after the first. 

1[(ii) Every certificate shall specify the shares to which it relates and the amount paid-up thereon and shall be 
signed by two directors or by a director and the company secretary, wherever the company has appointed a company 
secretary: 

Provided that in case the company has a common seal it shall be affixed in the presence of the persons required 

to sign the certificate. 

Explanation.—For the purposes of this item, it is hereby clarified that in case of an One Person Company, it shall 
be sufficient if the certificate is signed by a director and the company secretary, wherever the company has appointed 
a company secretary, or any other person authorised by the Board for the purpose.] 

(iii) In respect of any share or shares held jointly by several persons, the company shall not be bound to issue 
more than one certificate, and delivery of a certificate for a share to one of several joint holders shall be sufficient 
delivery to all such holders. 

3. (i) If any share certificate be worn out, defaced, mutilated or torn or if there be no further space on the back for 
endorsement of transfer, then upon production and surrender thereof to the company, a new certificate may be issued 
in lieu thereof, and if any certificate is lost or destroyed then upon proof thereof to the satisfaction of the company 
and on execution of such indemnity as the company deem adequate, a new certificate in lieu thereof shall be given. 
Every certificate under this Article shall be issued on payment of twenty rupees for each certificate. 

(ii) The provisions of Articles (2) and (3) shall mutatis mutandis apply to debentures of the company. 

4. Except as required by law, no person shall be recognised by the company as holding any share upon any trust, 
and the company shall not be bound by, or be compelled in any way to recognise (even when having notice thereof) 
any equitable, contingent, future or partial interest in any share, or any interest in any fractional part of a share, or 
(except only as by these regulations or by law otherwise provided) any other rights in respect of any share except an 
absolute right to the entirety thereof in the registered holder. 

1. Subs. by Notification No. G.S.R. 362(E), dated 10th April, 2018 for item (ii) in sub-paragraph (2) (w.e.f. 10-4-2018). 

259 

 
                                                           
5. (i) The company may exercise the powers of paying commissions conferred by sub-section (6) of section 40, 
provided that the rate per cent. or the amount of the commission paid or agreed to be paid shall be disclosed in the 
manner required by that section and rules made thereunder. 

(ii) The rate or amount of the commission shall not exceed the rate or amount prescribed in rules made under sub-

section (6) of section 40. 

(iii) The commission may be satisfied by the payment of cash or the allotment of fully or partly paid shares or 

partly in the one way and partly in the other. 

6. (i) If at any time the share capital is divided into different classes of shares, the rights attached to any class 
(unless otherwise provided by the terms of issue of the shares of that class) may, subject to the provisions of section 
48, and whether or not the company is being wound up, be varied with the consent in writing of the holders of three-
fourths of the issued shares of that class, or with the sanction of a special resolution passed at a separate meeting of 
the holders of the shares of that class. 

(ii) To every such separate meeting, the provisions of these regulations relating to general meetings shall mutatis 
mutandis apply, but so that the necessary quorum shall be at least two persons holding at least one-third of the issued 
shares of the class in question. 

7. The rights conferred upon the holders of the shares of any class issued with preferred or other rights shall not, 
unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the 
creation or issue of further shares ranking pari passu therewith. 

8. Subject to the provisions of section 55, any preference shares may, with the sanction of an ordinary resolution, 
be issued on the terms that they are to be redeemed on such terms and in such manner as the company before the issue 
of the shares may, by special resolution, determine. 

9. (i) The company shall have a first and paramount lien— 

Lien 

(a) on every share (not being a fully paid share), for all monies (whether presently payable or not) called, or 

payable at a fixed time, in respect of that share; and 

(b) on all shares (not being fully paid shares) standing registered in the name of a single person, for all monies 

presently payable by him or his estate to the company: 

Provided that the Board of directors may at any time declare any share to be wholly or in part exempt from 

the provisions of this clause. 

(ii) The company’s lien, if any, on a share shall extend to all dividends payable and bonuses declared from time 

to time in respect of such shares. 

10. The company may sell, in such manner as the Board thinks fit, any shares on which the company has a lien: 

Provided that no sale shall be made— 

(a) unless a sum in respect of which the lien exists is presently payable; or 

(b) until the expiration of fourteen days after a notice in writing stating and demanding payment of such part 
of the amount in respect of which the lien exists as is presently payable, has been given to the registered holder 
for the time being of the share or the person entitled thereto by reason of his death or insolvency. 

11. (i) To give effect to any such sale, the Board may authorise some person to transfer the shares sold to the 

purchaser thereof. 

(ii) The purchaser shall be registered as the holder of the shares comprised in any such transfer. 

(iii) The purchaser shall not be bound to see to the application of the purchase money, nor shall his title to the 

shares be affected by any irregularity or invalidity in the proceedings in reference to the sale. 

12. (i) The proceeds of the sale shall be received by the company and applied in payment of such part of the 

amount in respect of which the lien exists as is presently payable. 

260 

 
(ii) The residue, if any, shall, subject to a like lien for sums not presently payable as existed upon the shares before 

the sale, be paid to the person entitled to the shares at the date of the sale. 

Calls on shares 

13. (i) The Board may, from time to time, make calls upon the members in respect of any monies unpaid on their 
shares (whether on account of the nominal value of the shares or by way of premium) and not by the conditions of 
allotment thereof made payable at fixed times: 

Provided that no call shall exceed one-fourth of the nominal value of the share or be payable at less than one 

month from the date fixed for the payment of the last preceding call. 

(ii) Each member shall, subject to receiving at least fourteen days’ notice specifying the time or times and place 

of payment, pay to the company, at the time or times and place so specified, the amount called on his shares. 

(iii) A call may be revoked or postponed at the discretion of the Board. 

14. A call shall be deemed to have been made at the time when the resolution of the Board authorising the call 

was passed and may be required to be paid by instalments. 

15. The joint holders of a share shall be jointly and severally liable to pay all calls in respect thereof. 

16. (i) If a sum called in respect of a share is not paid before or on the day appointed for payment thereof, the 
person from whom the sum is due shall pay interest thereon from the day appointed for payment thereof to the time 
of actual payment at ten per cent. per annum or at such lower rate, if any, as the Board may determine. 

(ii) The Board shall be at liberty to waive payment of any such interest wholly or in part. 

17. (i) Any sum which by the terms of issue of a share becomes payable on allotment or at any fixed date, whether 
on account of the nominal value of the share or by way of premium, shall, for the purposes of these regulations, be 
deemed to be a call duly made and payable on the date on which by the terms of issue such sum becomes payable. 

(ii) In case of non-payment of such sum, all the relevant provisions of these regulations as to payment of interest 
and expenses, forfeiture or otherwise shall apply as if such sum had become payable by virtue of a call duly made 
and notified. 

18. The Board— 

(a) may, if it thinks fit, receive from any member willing to advance the same, all or any part of the monies 

uncalled and unpaid upon any shares held by him; and 

(b) upon all or any of the monies so advanced, may (until the same would, but for such advance, become 
presently payable) pay interest at such rate not exceeding, unless the company in general meeting shall otherwise 
direct, twelve per cent. per annum, as may be agreed upon between the Board and the member paying the sum in 
advance. 

Transfer of shares 

19.  (i) The  instrument  of transfer  of any  share in  the  company  shall be executed  by  or  on  behalf  of  both the 

transferor and transferee. 

(ii) The transferor shall be deemed to remain a holder of the share until the name of the transferee is entered in 

the register of members in respect thereof. 

20. The Board may, subject to the right of appeal conferred by section 58 decline to register— 

(a) the transfer of a share, not being a fully paid share, to a person of whom they do not approve; or 

(b) any transfer of shares on which the company has a lien. 

21. The Board may decline to recognise any instrument of transfer unless— 

(a) the instrument of transfer is in the form as prescribed in rules made under sub-section (1) of section 56; 

261 

 
(b) the instrument of transfer is accompanied by the certificate of the shares to which it relates, and such other 

evidence as the Board may reasonably require to show the right of the transferor to make the transfer; and 

(c) the instrument of transfer is in respect of only one class of shares. 

22. On giving not less than seven days’ previous notice in accordance with section 91and rules made thereunder, 
the registration of transfers may be suspended at such times and for such periods as the Board may from time to time 
determine: 

Provided that such registration shall not be suspended for more than thirty days at any one time or for more than 

forty-five days in the aggregate in any year. 

Transmission of shares 

23. (i) On the death of a member, the survivor or survivors where the member was a joint holder, and his nominee 
or nominees or legal representatives where he was a sole holder, shall be the only persons recognised by the company 
as having any title to his interest in the shares. 

(ii) Nothing in clause (i) shall release the estate of a deceased joint holder from any liability in respect of any 

share which had been jointly held by him with other persons. 

24. (i) Any person becoming entitled to a share in consequence of the death or insolvency of a member may, upon 
such evidence being produced as may from time to time properly be required by the Board and subject as hereinafter 
provided, elect, either— 

(a) to be registered himself as holder of the share; or 

(b) to make such transfer of the share as the deceased or insolvent member could have made. 

(ii) The Board shall, in either case, have the same right to decline or suspend registration as it would have had, if 

the deceased or insolvent member had transferred the share before his death or insolvency. 

25. (i) If the person so becoming entitled shall elect to be registered as holder of the share himself, he shall deliver 

or send to the company a notice in writing signed by him stating that he so elects. 

(ii) If the person aforesaid shall elect to transfer the share, he shall testify his election by executing a transfer of 

the share. 

(iii) All the limitations, restrictions and provisions of these regulations relating to the right to transfer and the 
registration of transfers of shares shall be applicable to any such notice or transfer as aforesaid as if the death or 
insolvency of the member had not occurred and the notice or transfer were a transfer signed by that member. 

26. A person becoming entitled to a share by reason of the death or insolvency of the holder shall be entitled to 
the same dividends and other advantages to which he would been titled if he were the registered holder of the share, 
except that he shall not, before being registered as a member in respect of the share, be entitled in respect of it to 
exercise any right conferred by membership in relation to meetings of the company: 

Provided that the Board may, at any time, give notice requiring any such person to elect either to be registered 
himself or to transfer the share, and if the notice is not complied with within ninety days, the Board may thereafter 
withhold payment of all dividends, bonuses or other monies payable in respect of the share, until the requirements of 
the notice have been complied with. 

27. In case of a One Person Company— 

(i) on the death of the sole member, the person nominated by such member shall be the person recognised by 

the company as having title to all the shares of the member; 

(ii) the nominee on becoming entitled to such shares in case of the member’s death shall be informed of such 

event by the Board of the company; 

(iii) such nominee shall be entitled to the same dividends and other rights and liabilities to which such sole 

member of the company was entitled or liable; 

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(iv) on becoming member, such nominee shall nominate any other person with the prior written consent of 

such person who, shall in the event of the death of the member, become the member of the company. 

Forfeiture of shares 

28. If a member fails to pay any call, or instalment of a call, on the day appointed for payment thereof, the Board 
may, at any time thereafter during such time as any part of the call or instalment remains unpaid, serve a notice on 
him requiring payment of so much of the call or instalment as is unpaid, together with any interest which may have 
accrued. 

29. The notice aforesaid shall— 

(a) name a further day  (not being earlier than the expiry of fourteen days from the date of service of the 

notice) on or before which the payment required by the notice is to be made; and 

(b) state that, in the event of non-payment on or before the day so named, the shares in respect of which the 

call was made shall be liable to be forfeited. 

30. If the requirements of any such notice as aforesaid are not complied with, any share in respect of which the 
notice  has  been  given  may,  at  any  time  thereafter,  before the  payment  required by  the  notice  has  been  made,  be 
forfeited by a resolution of the Board to that effect. 

31. (i) A forfeited share may be sold or otherwise disposed of on such terms and in such manner as the Board 

thinks fit. 

(ii) At any time before a sale or disposal as aforesaid, the Board may cancel the forfeiture on such terms as it 

thinks fit. 

32. (i) A person whose shares have been forfeited shall cease to be a member in respect of the forfeited shares, 
but  shall,  notwithstanding  the  forfeiture,  remain  liable  to  pay  to  the  company  all  monies  which,  at  the  date  of 
forfeiture, were presently payable by him to the company in respect of the shares. 

(ii) The liability of such person shall cease if and when the company shall have received payment in full of all 

such monies in respect of the shares. 

33. (i) A duly verified declaration in writing that the declarant is a director, the manager or the secretary, of the 
company,  and  that  a  share  in  the  company  has  been  duly  forfeited  on  a  date  stated  in  the  declaration,  shall  be 
conclusive evidence of the facts therein stated as against all persons claiming to be entitled to the share; 

(ii) The company may receive the consideration, if any, given for the share on any sale or disposal thereof and 

may execute a transfer of the share in favour of the person to whom the share is sold or disposed of; 

(iii) The transferee shall thereupon be registered as the holder of the share; and 

(iv) The transferee shall not be bound to see to the application of the purchase money, if any, nor shall his title to 
the share be affected by any irregularity or invalidity in the proceedings in reference to the forfeiture, sale or disposal 
of the share. 

34. The provisions of these regulations as to forfeiture shall apply in the case of non-payment of any sum which, 
by the terms of issue of a share, becomes payable at a fixed time, whether on account of the nominal value of the 
share or by way of premium, as if the same had been payable by virtue of a call duly made and notified. 

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Alteration of capital 

35. The company may, from time to time, by ordinary resolution increase the share capital by such sum, to be 

divided into shares of such amount, as may be specified in the resolution. 

36. Subject to the provisions of section 61, the company may, by ordinary resolution,— 

(a) consolidate and divide all or any of its share capital into shares of larger amount than its existing shares; 

(b) convert all or any of its fully paid-up shares into stock, and reconvert that stock into fully paid-up shares 

of any denomination; 

(c)  sub-divide  its  existing  shares  or  any  of  them  into  shares  of  smaller  amount  than  is  fixed  by  the 

memorandum; 

(d) cancel any shares which, at the date of the passing of the resolution, have-not been taken or agreed to be 

taken by any person. 

37. Where shares are converted into stock,— 

(a) the holders of stock may transfer the same or any part thereof in the same manner as, and subject to the 
same  regulations under  which,  the shares  from  which  the  stock  arose  might  before the  conversion have  been 
transferred, or as near thereto as circumstances admit: 

Provided that the Board may, from time to time, fix the minimum amount of stock transferable, so, however, 

that such minimum shall not exceed the nominal amount of the shares from which the stock arose. 

(b) the holders of stock shall, according to the amount of stock held by them, have the same rights, privileges 
and advantages as regards dividends, voting at meetings of the company, and other matters, as if they held the 
shares from which the stock arose; but no such privilege or advantage (except participation in the dividends and 
profits of the company and in the assets on winding up) shall be conferred by an amount of stock which would 
not, if existing in shares, have conferred that privilege or advantage. 

(c) such of the regulations of the company as are applicable to paid-up shares shall apply to stock and the 

words “share” and “shareholder” in those regulations shall include “stock” and “stock-holder” respectively. 

38.  The  company  may,  by  special  resolution,  reduce  in  any  manner  and  with,  and  subject  to,  any  incident 

authorised and consent required by law,— 

(a) its share capital; 

(b) any capital redemption reserve account; or 

(c) any share premium account. 

Capitalisation of profits 

39. (i) The company in general meeting may, upon the recommendation of the Board, resolve— 

(a) that it is desirable to capitalise any part of the amount for the time being standing to the credit of any of 
the  company’s  reserve  accounts,  or  to  the  credit  of  the  profit  and  loss  account,  or  otherwise  available  for 
distribution; and 

(b) that such sum be accordingly set free for distribution in the manner specified in clause (ii) amongst the 

members who would have been entitled thereto, if distributed by way of dividend and in the same proportions. 

(ii) The sum aforesaid shall not be paid in cash but shall be applied, subject to the provision contained in clause 

(iii), either in or towards— 

(A) paying up any amounts for the time being unpaid on any shares held by such members respectively; 

(B) paying up in full, unissued shares of the company to be allotted and distributed, credited as fully paid-up, 

to and amongst such members in the proportions aforesaid; 

264 

 
(C) partly in the way specified in sub-clause (A) and partly in that specified in sub-clause (B); 

(D) A securities premium account and a capital redemption reserve account may, for the purposes of this 
regulation, be applied in the paying up of unissued shares to be issued to members of the company as fully paid 
bonus shares; 

(E) The Board shall give effect to the resolution passed by the company in pursuance of this regulation. 

40. (i) Whenever such a resolution as aforesaid shall have been passed, the Board shall— 

(a) make all appropriations and applications of the undivided profits resolved to be capitalised thereby, and 

all allotments and issues of fully paid shares if any; and 

(b) generally do all acts and things required to give effect thereto. 

(ii) The Board shall have power— 

(a) to make such provisions, by the issue of fractional certificates or by payment in cash or otherwise as it 

thinks fit, for the case of shares becoming distributable infractions; and 

(b) to authorise any person to enter, on behalf of all the members entitled thereto, into an agreement with the 
company providing for the allotment to them respectively, credited as fully paid-up, of any further shares to which 
they may be entitled upon such capitalisation, or as the case may require, for the payment by the company on 
their behalf, by the application thereto of their respective proportions of profits resolved  to be capitalised, of the 
amount or any part of the amounts remaining unpaid on their existing shares; 

(iii) any agreement made under such authority shall be effective and binding on such members. 

Buy-back of shares 

41. Notwithstanding anything contained in these articles but subject to the provisions of sections 68 to 70 and any 
other applicable provision of the Act or any other law for the time being in force, the company may purchase its own 
shares or other specified securities. 

General meetings 

42. All general meetings other than annual general meeting shall be called extraordinary general meeting. 

43. (i) The Board may, whenever it thinks fit, call an extraordinary general meeting. 

(ii) If at any time directors capable of acting who are sufficient in number to form a quorum are not within India, 
any director or any two members of the company may call an extraordinary general meeting in the same manner, as 
nearly as possible, as that in which such a meeting may be called by the Board. 

Proceedings at general meetings 

44. (i) No business shall be transacted at any general meeting unless a quorum of members is present at the time 

when the meeting proceeds to business. 

(ii) Save as otherwise provided herein, the quorum for the general meetings shall be as provided in section 103. 

45. The Chairperson, if any, of the Board shall preside as Chairperson at every general meeting of the company. 

46. If there is no such Chairperson, or if he is not present  within fifteen minutes after the time appointed for 
holding the meeting, or is unwilling to act as Chairperson of the meeting, the directors present shall elect one of their 
members to be Chairperson of the meeting. 

47. If at any meeting no director is willing to act as Chairperson or if no director is present within fifteen minutes 
after  the  time  appointed  for  holding  the  meeting,  the  members  present  shall  choose  one  of  their  members  to  be 
Chairperson of the meeting. 

48. In case of a One Person Company— 

265 

 
(i) the resolution required to be passed at the general meetings of the company shall be deemed to have been 
passed if the resolution is agreed upon by the sole member and communicated to the company and entered in the 
minutes book maintained under section 118; 

(ii) such minutes book shall be signed and dated by the member; 

(iii) the resolution shall become effective from the date of signing such minutes by the sole member. 

Adjournment of meeting 

49.  (i) The  Chairperson  may,  with  the  consent  of any  meeting  at  which  a  quorum  is  present, and  shall,  if  so 

directed by the meeting, adjourn the meeting from time to time and from place to place. 

(ii) No business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting 

from which the adjournment took place. 

(iii) When a meeting is adjourned for thirty days or more, notice of the adjourned meeting shall be given as in the 

case of an original meeting. 

(iv) Save as aforesaid, and as provided in section 103 of the Act, it shall not be necessary to give any notice of an 

adjournment or of the business to be transacted at an adjourned meeting. 

Voting rights 

50. Subject to any rights or restrictions for the time being attached to any class or classes of shares,— 

(a) on a show of hands, every member present in person shall have one vote; and 

(b) on a poll, the voting rights of members shall be in proportion to his share in the paid-up equity share 

capital of the company. 

51. A member may exercise his vote at a meeting by electronic means in accordance with section 108 and shall 

vote only once. 

52. (i) In the case of joint holders, the vote of the senior who tenders a vote, whether in person or by proxy, shall 

be accepted to the exclusion of the votes of the other joint holders. 

(ii)  For  this  purpose,  seniority  shall  be  determined  by  the  order  in  which  the  names  stand  in  the  register  of 

members. 

53. A member of unsound mind, or in respect of whom an order has been made by any court having jurisdiction 
in lunacy, may vote, whether on a show of hands or on a poll, by his committee or other legal guardian, and any such 
committee or guardian may, on a poll, vote by proxy. 

54. Any business other than that upon which a poll has been demanded may be proceeded with, pending the 

taking of the poll. 

55. No member shall be entitled to vote at any general meeting unless all calls or other sums presently payable 

by him in respect of shares in the company have been paid. 

56. (i) No objection shall be raised to the qualification of any voter except at the meeting or adjourned meeting 
at which the vote objected to is given or tendered, and every vote not disallowed at such meeting shall be valid for all 
purposes. 

(ii) Any such objection made in due time shall be referred to the Chairperson of the meeting, whose decision shall 

be final and conclusive. 

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Proxy 

57. The instrument appointing a proxy and the power-of-attorney or other authority, if any, under which it is 
signed or a notarised copy of that power or authority, shall be deposited at the registered office of the company not 
less than 48 hours before the time for holding the meeting or adjourned meeting at which the person named in the 
instrument proposes to vote, or, in the case of a poll, not less than 24 hours before the time appointed for the taking 
of the poll; and in default the instrument of proxy shall not be treated as valid. 

58. An instrument appointing a proxy shall be in the form as prescribed in the rules made under section 105. 

59.  A  vote  given  in  accordance  with  the  terms  of  an  instrument  of  proxy  shall  be  valid,  notwithstanding  the 
previous death or insanity of the principal or the revocation of the proxy or of the authority under which the proxy 
was executed, or the transfer of the shares in respect of which the proxy is given: 

Provided that no intimation in writing of such death, insanity, revocation or transfer shall have been received by 
the company at its office before the commencement of the meeting or adjourned meeting at which the proxy is used. 

Board of Directors 

60.  The  number  of  the  directors  and  the  names  of  the  first  directors  shall  be  determined  in  writing  by  the 

subscribers of the memorandum or a majority of them. 

61. (i) The remuneration of the directors shall, in so far as it consists of a monthly payment, be deemed to accrue 

from day-to-day. 

(ii)  In  addition  to  the  remuneration  payable  to  them  in  pursuance  of  the  Act,  the  directors  may  be  paid  all 

travelling, hotel and other expenses properly incurred by them— 

(a) in attending and returning from meetings of the Board of Directors or any committee thereof or general 

meetings of the company; or 

(b) in connection with the business of the company. 

62. The Board may pay all expenses incurred in getting up and registering the company. 

63. The company may exercise the powers conferred on it by section 88 with regard to the keeping of a foreign 
register; and the Board may (subject to the provisions of that section) make and vary such regulations as it may thinks 
fit respecting the keeping of any such register. 

64. All cheques,  promissory notes, drafts,  hundis, bills of exchange and other negotiable instruments, and all 
receipts for monies paid to the company, shall be signed, drawn, accepted, endorsed, or otherwise executed, as the 
case may be, by such person and in such manner as the Board shall from time to time by resolution determine. 

65. Every director present at any meeting of the Board or of a committee thereof shall sign his name in a book to 

be kept for that purpose. 

66. (i) Subject to the provisions of section 149, the Board shall have power at any time, and from time to time, to 
appoint a person as an additional director, provided the number of the directors and additional directors together shall 
not at any time exceed the maximum strength fixed for the Board by the articles. 

(ii) Such person shall hold office only up to the date of the next annual general meeting of the company but shall 

be eligible for appointment by the company as a director at that meeting subject to the provisions of the Act. 

Proceedings of the Board 

67. (i) The Board of Directors may meet for the conduct of business, adjourn and otherwise regulate its meetings, 

as it thinks fit. 

(ii) A director may, and the manager or secretary on the requisition of a director shall, at any time, summon a 

meeting of the Board. 

267 

 
68. (i) Save as otherwise expressly provided in the Act, questions arising at any meeting of the Board shall be 

decided by a majority of votes. 

(ii) In case of an equality of votes, the Chairperson of the Board, if any, shall have a second or casting vote. 

69. The continuing directors may act notwithstanding any vacancy in the Board; but, if and so long as their number 
is reduced below the quorum fixed by the Act for a meeting of the Board, the continuing directors or director may act 
for the purpose of increasing the number of directors to that fixed for the quorum, or of summoning a general meeting 
of the company, but for no other purpose. 

70. (i) The Board may elect a Chairperson of its meetings and determine the period for which he is to hold office. 

(ii) If no such Chairperson is elected, or if at any meeting the Chairperson is not present within five minutes after 
the time appointed for holding the meeting, the directors present may choose one of their number to be Chairperson 
of the meeting. 

71. (i) The Board may, subject to the provisions of the Act, delegate any of its powers to committees consisting 

of such member or members of its body as it thinks fit. 

(ii) Any committee so formed shall, in the exercise of the powers so delegated, conform to any regulations that 

may be imposed on it by the Board. 

72. (i) A committee may elect a Chairperson of its meetings. 

(ii) If no such Chairperson is elected, or if at any meeting the Chairperson is not present within five minutes after 
the time appointed for holding the meeting, the members present may choose one of their members to be Chairperson 
of the meeting. 

73. (i) A committee may meet and adjourn as it thinks fit. 

(ii) Questions arising at any meeting of a committee shall be determined by a majority of votes of the members 

present, and in case of an equality of votes, the Chairperson shall have a second or casting vote. 

74. All acts done in any meeting of the Board or of a committee thereof or by any person acting as a director, 
shall, notwithstanding that it may be afterwards discovered that there was some defect in the appointment of any one 
or more of such directors or of any person acting as aforesaid, or that they or any of them were disqualified, be as 
valid as if every such director or such person had been duly appointed and was qualified to be a director. 

75. Save as otherwise expressly provided in the Act, a resolution in writing, signed by all the members of the 
Board or of a committee thereof, for the time being entitled to receive notice of a meeting of the Board or committee, 
shall be valid and effective as if it had been passed at a meeting of the Board or committee, duly convened and held. 

76. In case of a One Person Company— 

(i) where the company is having only one director, all the businesses to be transacted at the meeting of the 

Board shall be entered into minutes book maintained under section 118; 

(ii) such minutes book shall be signed and dated by the director; 

(iii) the resolution shall become effective from the date of signing such minutes by the director. 

Chief Executive Officer, Manager, Company Secretary or Chief Financial Officer 

77. Subject to the provisions of the Act,— 

(i) A chief executive officer, manager, company secretary or chief financial officer may be appointed by the 
Board for such term, at such remuneration and upon such conditions as it may thinks fit; and any chief executive 
officer, manager, company secretary or chief financial officer so appointed may be removed by means of are 
solution of the Board; 

(ii) A director may be appointed as chief executive officer, manager, company secretary or chief financial 

officer. 

268 

 
78. A provision of the Act or these regulations requiring or authorising a thing to be done by or to a director and 
chief executive officer, manager, company secretary or chief financial officer shall not be satisfied by its being done 
by or to the same person acting both as director and as, or in place of, chief executive officer, manager, company 
secretary or chief financial officer. 

79. (i) The Board shall provide for the safe custody of the seal. 

The Seal 

(ii) The seal of the company shall not be affixed to any instrument except by the authority of a resolution of the 
Board or of a committee of the Board authorised by it in that behalf, and except in the presence of at least two directors 
and of the secretary or such other person as the Board may appoint for the purpose; and those two directors and the 
secretary or other person aforesaid shall sign every instrument to which the seal of the company is so affixed in their 
presence. 

1[Explanation.—For the purposes of this sub-paragraph it is hereby clarified that on and from the commencement 
of the Companies (Amendment) Act, 2015 (21 of 2015), i.e. with effect from the 29th May, 2015, company may not 
be  required to  have  the  seal  by  virtue  of  registration  under the  Act  and if  a company  does not  have the  seal,  the 
provisions of this sub-paragraph shall not be applicable.] 

Dividends and Reserve 

80.  The  company  in  general  meeting  may  declare  dividends,  but  no  dividend  shall  exceed  the  amount 

recommended by the Board. 

81. Subject to the provisions of section 123, the Board may from time to time pay to the members such interim 

dividends as appear to it to be justified by the profits of the company. 

82. (i) The Board may, before recommending any dividend, set aside out of the profits of the company such sums 
as it thinks fit as a reserve or reserves which shall, at the discretion of the Board, be applicable for any purpose to 
which  the  profits  of  the  company  may  be  properly  applied,  including  provision  for  meeting  contingencies  or  for 
equalizing dividends; and pending such application, may, at the like discretion, either be employed in the business of 
the company or be invested in such investments (other than shares of the company) as the Board may, from time to 
time, thinks fit. 

(ii) The Board may also carry forward any profits which it may consider necessary not to divide, without setting 

them aside as a reserve. 

83. (i) Subject to the rights of persons, if any, entitled to shares with special rights as to dividends, all dividends 
shall be declared and paid according to the amounts paid or credited as paid on the shares in respect whereof the 
dividend is paid, but if and so long as nothing is paid upon any of the shares in the company, dividends may be 
declared and paid according to the amounts of the shares. 

(ii) No amount paid or credited as paid on a share in advance of calls shall be treated for the purposes of this 

regulation as paid on the share. 

(iii) All dividends shall be apportioned and paid proportionately to the amounts paid or credited as paid on the 
shares during any portion or portions of the period in respect of which the dividend is paid; but if any share is issued 
on  terms  providing  that  it  shall  rank  for  dividend  as  from  a  particular  date  such  share  shall  rank  for  dividend 
accordingly. 

84. The Board may deduct from any dividend payable to any member all sums of money, if any, presently payable 

by him to the company on account of calls or otherwise in relation to the shares of the company. 

85. (i) Any dividend, interest or other monies payable in cash in respect of shares may be paid by cheque or 
warrant sent through the post directed to the registered address of the holder or, in the case of joint holders, to the 
registered address of that one of the joint holders who is first named on the register of members, or to such person 
and to such address as the holder or joint holders may in writing direct. 

(ii) Every such cheque or warrant shall be made payable to the order of the person to whom it is sent. 

86. Any one of two or more joint holders of a share may give effective receipts for any dividends, bonuses or 

other monies payable in respect of such share. 

1. The Explanation ins. by Notification No. G.S.R. 362(E) dated 10th April, 2018 (w.e.f. 10-4-2018). 

269 

 
                                                           
87. Notice of any dividend that may have been declared shall be given to the persons entitled to share therein in 

the manner mentioned in the Act. 

88. No dividend shall bear interest against the company. 

Accounts 

89. (i) The Board shall from time to time determine whether and to what extent and at what times and places and 
under what conditions or regulations, the accounts and books of the company, or any of them, shall be open to the 
inspection of members not being directors. 

(ii) No member (not being a director) shall have any right of inspecting any account or book or document of the 

company except as conferred by law or authorised by the Board or by the company in general meeting. 

Winding up 

90. Subject to the provisions of Chapter XX of the Act and rules made thereunder— 

(i) If the company shall be wound up, the liquidator may, with the sanction of a special resolution of the 
company and any other sanction required by the Act, divide amongst the members, in specie or kind, the whole 
or any part of the assets of the company, whether they shall consist of property of the same kind or not. 

(ii) For the purpose aforesaid, the liquidator may set such value as he deems fair upon any property to be 
divided  as  aforesaid  and  may  determine  how  such  division  shall  be  carried  out  as  between  the  members  or 
different classes of members. 

(iii) The liquidator may, with the like sanction, vest the whole or any part of such assets in trustees upon such 
trusts for the benefit of the contributories if he considers necessary, but so that no member shall be compelled to 
accept any shares or other securities whereon there is any liability. 

Indemnity 

91.  Every  officer  of  the  company  shall  be  indemnified  out  of  the assets of  the company  against  any  liability 
incurred by him in defending any proceedings, whether civil or criminal, in which judgment is given in his favour or 
in which he is acquitted or in which relief is granted to him by the court or the Tribunal. 

Note: The Articles shall be signed by each subscriber of the memorandum of association who shall add his address, 
description and occupation, if any, in the presence of at least one witness who shall attest the signature and shall 
likewise add his address, description and occupation, if any, and such signatures shall be in form specified below: 

Names, addresses, descriptions 

Witnesses (along with names, addresses, 

and occupations of subscribers 

descriptions and occupations) 

A.B. of………….Merchant 

C.D. of………….Merchant 

E.F. of…………. Merchant 

G.H. of………….Merchant 

Signed before me 

Signature……………. 

Signed before me 

Signature……………. 

Signed before me 

Signature……………. 

Signed before me 

Signature……………. 

270 

 
 
 
I.J. of………….Merchant 

K.L. of………….Merchant 

M.N. of………….Merchant 

Dated the……..day of ………20…… 

Place: ................................ 

TABLE – G 

Signed before me 

Signature……………. 

Signed before me 

Signature……………. 

Signed before me 

Signature……………. 

ARTICLES OF ASSOCIATION OF A COMPANY LIMITED BY GUARANTEE AND 
HAVING A SHARE CAPITAL 

1.  The  number  of  members  with  which  the  company  proposes  to  be  registered  is  hundred,  but  the  Board  of 

Directors may, from time to time, register an increase of members. 

2. All the articles of Table F in Schedule I annexed to the Companies Act, 2013 shall be deemed to be incorporated 

with these articles and to apply to the company. 

TABLE - H 

ARTICLES OF ASSOCIATION OF A COMPANY LIMITED BY GUARANTEE AND NOT 
HAVING SHARE CAPITAL 

Interpretation 

I. (1) In these regulations— 

(a) “the Act” means the Companies Act, 2013; 

(b) “the seal” means the common seal of the company. 

(2) Unless the context otherwise requires, words or expressions contained in these regulations shall have the same 
meaning as in the Act or any statutory modification thereof in force at the date at which these regulations become 
binding on the company. 

Members 

II. 1. The number of members with which the company proposes to be registered is hundred, but the Board of 
Directors  may,  from  time  to  time,  whenever the company  or  the  business  of  the  company  requires it, register  an 
increase of members. 

2. The subscribers to the memorandum and such other persons as the Board shall admit to membership shall be 

members of the company. 

General meetings 

3. All general meetings other than annual general meeting shall be called extraordinary general meeting. 

4. (i) The Board may, whenever it thinks fit, call an extraordinary general meeting. 

(ii) If at any time directors capable of acting who are sufficient in number to form a quorum are not within India, 
any director or any two members of the company may call an extraordinary general meeting in the same manner, as 
nearly as possible, as that in which such a meeting may be called by the Board. 

271 

 
 
 
 
 
Proceedings at general meetings 

5. (i) No business shall be transacted at any general meeting unless a quorum of members is present at the time 

when the meeting proceeds to business. 

(ii) Save as otherwise provided herein, the quorum for the general meetings shall be as provided in section 103. 

6. The Chairperson, if any, of the Board shall preside as Chairperson at every general meeting of the company. 

7. If there is no such Chairperson, or if he is not present within fifteen minutes after the time appointed for holding 
the meeting, or is unwilling to act as Chairperson of the meeting, the directors present shall elect one of their members 
to be Chairperson of the meeting. 

8. If at any meeting no director is willing to act as Chairperson or if no director is present within fifteen minutes 
after  the  time  appointed  for  holding  the  meeting,  the  members  present  shall  choose  one  of  their  members  to  be 
Chairperson of the meeting. 

Adjournment of meeting 

9. (i) The Chairperson may, with the consent of any meeting at which a quorum is present, and shall, if so directed 

by the meeting, adjourn the meeting from time to time and from place to place. 

(ii) No business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting 

from which the adjournment took place. 

(iii) When a meeting is adjourned for thirty days or more, notice of the adjourned meeting shall be given as in the 

case of an original meeting. 

(iv) Save as aforesaid, and as provided in section 103 of the Act, it shall not be necessary to give any notice of an 

adjournment or of the business to be transacted at an adjourned meeting. 

10. Every member shall have one vote. 

Voting rights 

11. A member of unsound mind, or in respect of whom an order has been made by any Court having 

jurisdiction in lunacy, may vote, whether on a show of hands or on a poll, by his committee or other legal guardian, 
and any such committee or guardian may, on a poll, vote by proxy. 

12. No member shall be entitled to vote at any general meeting unless all sums presently payable by him to the 

company have been paid. 

13. (i) No objection shall be raised to the qualification of any voter except at the meeting or adjourned meeting 
at which the vote objected to is given or tendered, and every vote not disallowed at such meeting shall be valid for 
all purposes. 

(ii) Any such objection made in due time shall be referred to the Chairperson of the meeting, whose decision 

shall be final and conclusive. 

14.  A  vote  given  in  accordance  with  the  terms  of  an  instrument  of  proxy  shall  be  valid,  notwithstanding  the 
previous death or insanity of the principal or the revocation of the proxy or of the authority under which the proxy 
was executed, or the transfer of the shares in respect of which the proxy is given: 

Provided that no intimation in writing of such death, insanity, revocation or transfer shall have been received by 
the company at its office before the commencement of the meeting or adjourned meeting at which the proxy is used. 

15. A member may exercise his vote at a meeting by electronic means in accordance with section 108 and shall 

vote only once. 

16. Any business other than that upon which a poll has been demanded may be proceeded with, pending the 

taking of the poll. 

Board of Directors 

272 

 
17.  The  number  of  the  directors  and  the  names  of  the  first  directors  shall  be  determined  in  writing  by  the 

subscribers of the memorandum or a majority of them. 

18. (i) The remuneration of the directors shall, in so far as it consists of a monthly payment, be deemed to accrue 

from day-to-day. 

(ii)  In  addition  to  the  remuneration  payable  to  them  in  pursuance  of  the  Act,  the  directors  may  be  paid  all 

travelling, hotel and other expenses properly incurred by them— 

(a) in attending and returning from meetings of the Board of Directors or any committee thereof or general 

meetings of the company; or 

(b) in connection with the business of the company. 

Proceedings of the Board 

19. (i) The Board of Directors may meet for the conduct of business, adjourn and otherwise regulate its meetings, 

as it thinks fit. 

(ii) A director may, and the manager or secretary on the requisition of a director shall, at any time, summon a 

meeting of the Board. 

20. (i) Save as otherwise expressly provided in the Act, questions arising at any meeting of the Board shall be 

decided by a majority of votes. 

(ii) In case of an equality of votes, the Chairperson of the Board, if any, shall have a second or casting vote. 

21. The continuing directors may act notwithstanding any vacancy in the Board; but, if and so long as their number 
is reduced below the quorum fixed by the Act for a meeting of the Board, the continuing directors or director may act 
for the purpose of increasing the number of directors to that fixed for the quorum, or of summoning a general meeting 
of the company, but for no other purpose. 

22. (i) The Board may elect a Chairperson of its meetings and determine the period for which he is to hold office. 

(ii) If no such Chairperson is elected, or if at any meeting the Chairperson is not present within five minutes after 
the time appointed for holding the meeting, the directors present may choose one of their members to be Chairperson 
of the meeting. 

23. (i) The Board may, subject to the provisions of the Act, delegate any of its powers to committees consisting 

of such member or members of its body as it thinks fit. 

(ii) Any committee so formed shall, in the exercise of the powers so delegated, conform to any regulations that 

may be imposed on it by the Board. 

24. (i) A committee may elect a Chairperson of its meetings. 

(ii) If no such Chairperson is elected, or if at any meeting the Chairperson is not present within five minutes after 
the time appointed for holding the meeting, the members present may choose one of their members to be Chairperson 
of the meeting. 

25. (i) A committee may meet and adjourn as it thinks proper. 

(ii) Questions arising at any meeting of a committee shall be determined by a majority of votes of the members 

present, and in case of an equality of votes, the Chairman shall have a second or casting vote. 

26. All acts done by any meeting of the Board or of a committee thereof or by any person acting as a director, 
shall, notwithstanding that it may be afterwards discovered that there was some defect in the appointment of any one 
or more of such directors or of any person acting as aforesaid, or that they or any of them were disqualified, be as 
valid as if every such director or such person had been duly appointed and was qualified to be a director. 

27. Save as otherwise expressly provided in the Act, a resolution in writing, signed by all the members of the 
Board or of a committee thereof, for the time being entitled to receive notice of a meeting of the Board or committee, 
shall be as valid and effective as if it had been passed at a meeting of the Board or committee, duly convened and 
held. 

273 

 
Chief Executive Officer, Manager, Company Secretary or 
Chief Financial Officer 

28. Subject to the provisions of the Act,— 

(i) A chief executive officer, manager, company secretary or chief financial officer may be appointed by the 
Board for  such  term,  at such  remuneration  and  upon such conditions  as it  thinks  fit; and  any  chief  executive 
officer,  manager,  company  secretary  or  chief  financial  officer  so  appointed  may  be  removed  by  means  of  a 
resolution of the Board. 

(ii) A director may be appointed as chief executive officer, manager, company secretary or chief financial 

officer. 
29. A provision of the Act or these regulations requiring or authorising a thing to be done by or to a director and 
chief executive officer, manager, company secretary or chief financial officer shall not be satisfied by its being done 
by or to the same person acting both as director and as, or in place of, chief executive officer, manager, company 
secretary or chief financial officer. 

The Seal 

30. (i) The Board shall provide for the safe custody of the seal. 
(ii) The seal of the company shall not be affixed to any instrument except by the authority of a resolution of the 
Board or of a committee of the Board authorised by it in that behalf, and except in the presence of at least two directors 
and of the secretary or such other person as the Board may appoint for the purpose; and those two directors and the 
secretary or other person aforesaid shall sign every instrument to which the seal of the company is so affixed in their 
presence. 

1[Explanation.—For the purposes of this sub-paragraph it is hereby clarified that on and from the commencement 
of the Companies (Amendment) Act, 2015 (21 of 2015), i.e. with effect from the 29th May, 2015, company may not 
be  required to  have  the  seal  by  virtue  of  registration  under the  Act  and if  a company  does not  have the  seal,  the 
provisions of this sub-paragraph shall not be applicable.] 
Note: The Articles shall be signed by each subscriber of the memorandum of association who shall add his address, 
description and occupation, if any, in the presence of at least one witness who shall attest the signature and shall 
likewise add his address, description and occupation, if any, and such signatures shall be in form specified below: 
Names, addresses, descriptions 
and occupations of subscribers 

Witnesses (along with names, addresses, 
descriptions and occupations) 

A.B. of………….Merchant 

C.D. of………….Merchant 

E.F. of…………. Merchant 

G.H. of………….Merchant 

I.J. of………….Merchant 

K.L. of………….Merchant 

M.N. of………….Merchant 

Signed before me 
Signature……………. 
Signed before me 
Signature……………. 
Signed before me 
Signature……………. 
Signed before me 
Signature……………. 
Signed before me 
Signature……………. 
Signed before me 
Signature……………. 
Signed before me 

1. The Explanation ins. by Notification No. G.S.R. 362(E), dated 10th April 2018 (w.e.f. 10-4-2018). 

274 

 
 
 
 
                                                           
Dated the……..day of ………20…… 
Place: ................................ 

Signature……………. 

TABLE – I 
ARTICLES OF ASSOCIATION OF AN UNLIMITED COMPANY AND 
HAVING A SHARE CAPITAL 

1.  The  number  of  members  with  which  the  company  proposes  to  be  registered  is  hundred,  but  the  Board  of 

Directors may, from time to time, register an increase of members. 

2. All the articles of Table F in Schedule I annexed to the Companies Act, 2013 shall be deemed to be incorporated 

with these articles and to apply to the company. 

TABLE - J 

ARTICLES OF ASSOCIATION OF AN UNLIMITED COMPANY AND 
NOT HAVING SHARE CAPITAL 

1.  The  number  of  members  with  which  the  company  proposes  to  be  registered  is  hundred,  but  the  Board  of 
Directors  may,  from  time  to  time,  whenever the company  or  the  business  of  the  company  requires it, register  an 
increase of members. 

2. The subscribers to the memorandum and such other persons as the Board shall admit to membership shall be 

members of the company. 

3. All the articles of Table H in Schedule I annexed to the Companies Act, 2013 shall be deemed to be incorporated 

with these articles and to apply to the company. 

275 

 
 
 
 
SCHEDULE II 

(See section 123) 

USEFUL LIVES TO COMPUTE DEPRECIATION 

PART ‘A’ 

1.  Depreciation  is  the  systematic  allocation  of  the  depreciable  amount  of  an  asset  over  its  useful  life.  The 
depreciable amount of an asset is the cost of an asset or other amount substituted for cost, less its residual value. The 
useful life of an asset is the period over which an asset is expected to be available for use by an entity, or the number 
of production or similar units expected to be obtained from the asset by the entity. 

2. For the purpose of this Schedule, the term depreciation includes amortisation. 

3. Without prejudice to the foregoing provisions of paragraph 1,— 

1[(i) The useful life of an asset shall not ordinarily be different from the useful life specified in Part C and the 

residual value of an asset shall not be more than five per cent. of the original cost of the asset: 

Provided that where a company adopts a useful life different from what is specified in Part C or uses a residual 
value different from the limit specified above, the financial statements shall disclose such difference and provide 
justification in this behalf duly supported by technical advice.] 

2[(ii) 3[For intangible assets, the relevant Indian Accounting Standards (Ind As) shall apply. Where a company 
is not required to comply with the Indian Accounting Standards (Ind As), it shall comply with relevant Accounting 
Standards under Companies (Accounting Standards) Rules, 2006] except in case of intangible assets (Toll Roads) 
created under 'Build, Operate and Transfer', 'Build, Own, Operate and Transfer' or any other form of public private 
partnership route in case of road projects. Amortisation in such cases may be done as follows:— 

(a) Mode of amortization 

Amortisation Rate = 

x 100 

Amortisation Amount=  

       Amorisation Amount 

Cost of Intangible Assets (A) 

    Cost of Intangible Assets (A) x   

Actual Revenue for the year (B) 

Projected  Revenue from Intangible Asset 
(till the end of the concession period) (C) 

(b) Meaning of particulars are as follows :— 

Cost of Intangible Assets (A) 

=  Cost incurred by the company in accordance with 

the accounting standards. 

Actual Revenue for the year (13) 

=  Actual revenue (Toll Charges) received during the 

accounting year. 

Projected Revenue from Intangible 
Asset (C) 

Total projected revenue from the Intangible Assets 
as provided to the project lender at the time of 
financial closure/agreement. 

The amortisation amount or rate should ensure that the whole of the cost of the intangible asset is amortised over 
the concession period. 

1. Subs. by Notification No. G.S.R. 627(E) dated 29th August  2014, for sub-paragraph (i) of paragraph 3  (w.e.f. 29-8-2014). 
2. Subs. by Notification No. G.S.R. 237(E), dated 31st March  2014, for sub-paragraph (i) to (iii) of paragraph 3(w.e.f. 1-4-2014). 
3. Subs. by Notification No. G.S.R. 1075(E), dated 17th November  2016 for sub-paragraph (iii) of paragraph 3 (w.e.f. 1-4-2016). 

276 

 
 
 
 
 
 
 
 
 
 
 
                                                           
Revenue shall be reviewed at the end of each financial year and projected revenue shall be adjusted to reflect 
such changes, if any, in the estimates as will lead to the actual collection at the end of the concession period. 

(c)  Example:— 

Cost of creation of Intangible Assets                   : 

Rs. 500 Crores 

Total period of Agreement                                   : 

Time used for creation of Intangible Assets        : 

Intangible Assets to be amortised in                    : 

20 Years 

2 Years 

18 Years 

Assuming that the Total revenue to be generated out of Intangible Assets over the period would be Rs. 
600 Crores, in the following manner:— 

Year No. 
Year 1 
Year 2 
Year 3 
Year 4 
Year 5 
Year 6 
Year 7 
Year 8 
Year 9 
Year 10 
Year 11 
Year 12 
Year 13 
Year 14 
Year 15 
Year 16 
Year 17 
Year 18 
Total 

Revenue( In Rs. Crores) 
5 
7.5 
10 
12.5 
17.5 
20 
23 
27 
31 
34 
38 
41 
46 
50 
53 
57 
60 
67.5 
600 

Remarks 
Actual  
Estimate * 
Estimate * 
Estimate * 
Estimate * 
Estimate * 
Estimate * 
Estimate * 
Estimate * 
Estimate * 
Estimate * 
Estimate * 
Estimate * 
Estimate * 
Estimate * 
Estimate * 
Estimate* 
Estimate * 

‘*’ will be actual at the end of financial year. 

Based on this the charge for first year would be Rs. 4.16 Crore  (approximately) (i.e. Rs. 5/Rs. 600 x Rs. 500 
Crores) which would be charged to profit and loss and 0.83% (i.e. Rs. 4.16 Crore/ Rs. 500 Crore x 100) is the 
amortisation rate for the first year. 

Where a company arrives at the amortisation amount in respect of the said Intangible Assets in accordance with 
any method as per the applicable Accounting Standards, it shall disclose the same.] 

PART ‘B’ 

4. The useful life or residual value of any specific asset, as notified for accounting purposes by a Regulatory 
Authority constituted under an Act of Parliament or by the Central Government shall be applied in calculating the 
depreciation to be provided for such asset irrespective of the requirements of this Schedule. 

277 

 
 
 
 
 
 
5. Subject to Parts A and B above, the following are the useful lives of various tangible assets: 

PART ‘C’ 

Nature of assets 

I. 

Buildings [NESD] 

(a)  Buildings (other than factory buildings) RCC Frame Structure 

(b)  Buildings (other than factory buildings) other than RCC Frame 

Structure 

(c)  Factory buildings 

(d)  Fences, wells, tube wells 

(e)  Others (including temporary structure, etc.) 

II. 

Bridges, culverts, bunders, etc. [NESD] 

III.  Roads [NESD] 

(a)  Carpeted roads 

(i)  Carpeted Roads-RCC 

(ii)  Carpeted Roads-other than RCC 

(b)  Non-carpeted roads 

IV. 

Plant and Machinery 

(i)  General rate applicable to plant and machinery not covered 

under special plant and machinery 

(a)  Plant  and  Machinery  other  than  continuous  process  plant  not 

covered under specific industries 

1[(b)  continuous  process  plant  for  which  no  special  rate  has  been 

prescribed under (ii) below [NESD] 

(ii)  Special Plant and Machinery 

(a)  Plant  and  Machinery  related  to  production  and  exhibition  of 

Motion Picture Films 

1.  Cinematograph  films—Machinery used in the production and 
exhibition of cinematograph films, recording and reproducing 
equipments,  developing  machines,  printing  machines,  editing 
machines, synchronizers and studio lights except bulbs 

2.  Projecting equipment for exhibition of films 

(b)  Plant and Machinery used in glass manufacturing 

1.  Plant and Machinery except direct fire glass melting furnaces 

—Recuperative and regenerative glass melting furnaces 

2.  Plant and Machinery except direct fire glass melting  furnaces 

—Moulds[NESD] 

3.  Float Glass Melting Furnaces [NESD] 

(c)  Plant  and  Machinery  used  in  mines  and  quarries—Portable 
underground  machinery  and  earth  moving  machinery  used  in 
open cast mining [NESD] 

(d)  Plant and Machinery used in Telecommunications [NESD] 

1. Subs. by Notification No. G.S.R. 237(E), dated 31st March 2014, for clause (b) (w.e.f. 1-4-2014). 

278 

Useful Life 

60 Years 

30 Years 

-do- 

5 Years 

3 Years 

30 Years 

10 Years 

5 Years 

3 Years 

15 Years 

25 Years] 

13  Years 

-do- 

13 Years 

8 Years 

10 Years 

8 Years 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
1.  Towers  

2.  Telecom transceivers, switching centres, transmission and other 

network equipment 

3.  Telecom—Ducts, Cables and optical fibre 

4.  Satellites 

(e)  Plant  and  Machinery  used  in  exploration,  production  and 

refining oil and gas [NESD] 

1.  Refineries 

2.  Oil  and  gas  assets  (including  wells),  processing  plant  and 

facilities 

3.  Petrochemical Plant 

4.  Storage tanks and related equipment 

5.  Pipelines 

6.  Drilling Rig 

7.  Field operations (above ground) Portable boilers, drilling tools, 

well-head tanks, etc. 

8.  Loggers 

(f)  Plant  and  Machinery  used  in  generation,  transmission  and 

distribution of power [NESD] 

1.  Thermal/ Gas/ Combined Cycle Power Generation Plant 

2.  Hydro Power Generation Plant 

3.  Nuclear Power Generation Plant 

4.  Transmission lines, cables and other network assets 

5.  Wind Power Generation Plant 

6.  Electric Distribution Plant 

7.  Gas Storage and Distribution Plant 

8.  Water Distribution Plant including pipelines 

(g)  Plant and Machinery used in manufacture of steel 

1.  Sinter Plant 

2.  Blast Furnace 

3.  Coke ovens 

4.  Rolling mill in steel plant 

5.  Basic oxygen Furnace Converter 

(h)  Plant and Machinery used in manufacture of non-ferrous metals 

1.  Metal pot line [NESD] 

2.  Bauxite crushing and grinding section [NESD] 

3.  Digester Section [NESD] 

4.  Turbine [NESD] 

279 

18 Years 

13 Years 

18 Years 

-do- 

25 Years 

-do- 

-do- 

-do- 

30 Years 

-do- 

8 Years 

-do- 

40 Years 

-do- 

-do- 

-do- 

22 Years 

35 Years 

30 Years 

-do- 

20 Years 

-do- 

-do- 

-do- 

25 Years 

40 Years 

-do- 

-do- 

-do- 

 
 
 
 
 
 
 
5.  Equipments for Calcination [NESD] 

6.  Copper Smelter [NESD] 

7.  Roll Grinder 

8.  Soaking Pit 

9.  Annealing Furnace 

10.  Rolling Mills 

11.  Equipments for Scalping, Slitting , etc. [NESD] 

12.  Surface Miner, Ripper Dozer, etc., used in mines 

13.  Copper refining plant [NESD] 

(i)  Plant  and  Machinery  used in  medical  and  surgical  operations 

[NESD] 

1.  Electrical  Machinery,  X-ray  and  electrotherapeutic  apparatus 
and  accessories  thereto,  medical,  diagnostic  equipments, 
namely, Cat-scan, Ultrasound Machines, ECG Monitors, etc. 

2.  Other Equipments. 

(j)  Plant  and Machinery  used in  manufacture  of pharmaceuticals 

and chemicals [NESD] 

1.  Reactors 

2.  Distillation Columns 

3.  Drying equipments/Centrifuges and Decanters 

4.  Vessel/storage tanks 

(k)  Plant and Machinery used in civil construction 

1.  Concreting,  Crushing,  Piling  Equipments  and  Road  Making 

Equipments 

2.  Heavy Lift Equipments— 

Cranes with capacity of more than 100 tons 

Cranes with capacity of less than 100 tons 

3.  Transmission line, Tunneling Equipments [NESD] 

4.  Earth-moving equipments 

5.  Others 

including  Material  Handling/Pipeline/Welding 

Equipments [NESD] 

(l)  Plant and Machinery used in salt works [NESD] 

V. 

Furniture and fittings [NESD] 

(i)  General furniture and fittings  

(ii)  Furniture and fittings used in hotels, restaurants and boarding 
houses,  schools,  colleges  and  other  educational  institutions, 
libraries;  welfare  centres;  meeting  halls,  cinema  houses; 
theatres and circuses; and furniture and fittings let out on hire 
for use on the occasion of marriages and similar functions. 

VI.  Motor Vehicles [NESD] 

1.  Motor cycles, scooters and other mopeds 

280 

-do- 

-do- 

40 Years 

30 Years 

-do- 

-do- 

-do- 

25 Years 

-do- 

13 Years 

15 Years 

20 Years 

-do- 

-do- 

-do- 

12 Years 

20 Years 

15 Years 

10 Years 

9 Years 

12 Years 

15 Years 

10 Years 

8 Years 

10 Years 

 
 
 
 
 
 
 
2.  Motor buses, motor lorries, motor cars and motor taxies used in 

a business of running them on hire 

3.  Motor buses, motor lorries and motor cars other than those used 

in a business of running them on hire 

4.  Motor tractors, harvesting combines and heavy vehicles 

5.  Electrically operated vehicles including battery powered or fuel 

cell powered vehicles 

VII. 

Ships [NESD] 

1.  Ocean-going ships 

(i)  Bulk Carriers and liner vessels 

(ii)  Crude tankers, product carriers and easy chemical carriers with 

or without conventional tank coatings. 

(iii) Chemicals and Acid Carriers: 

(a)  With Stainless steel tanks 

(b)  With other tanks 

(iv) Liquified gas carriers 

(v)  Conventional large passenger vessels which are used for cruise 

purpose also 

(vi) Coastal service ships of all categories 

(vii)  Offshore supply and support vessels 

(viii) Catamarans and other high speed passenger for ships or boats 

(ix) Drill ships 

(x)  Hovercrafts 

(xi) Fishing vessels with wooden hull 

(xii)  Dredgers, tugs, barges, survey launches and other similar ships 

used mainly for dredging purposes 

2.  Vessels ordinarily operating on inland waters— 

(i)  Speed boats 

(ii)  Other vessels 

VIII.  Aircrafts or Helicopters [NESD] 

IX.  Railways sidings, locomotives, rolling stocks, tramways and 
railways  used  by  concerns,  excluding  railway  concerns 
[NESD] 

X.  Ropeway structures [NESD] 

XI.  Office equipment [NESD] 

XII.  Computers and data processing units [NESD] 

(i)  Servers and networks 

(ii)  End user devices, such as, desktops, laptops, etc. 

XIII. 

Laboratory equipment [NESD] 

(i)  General laboratory equipment 

281 

6 Years 

8 Years 

-do- 

8 Years 

25 Years 

20 Years 

25 Years 

20 Years 

30 Years 

-do- 

-do- 

20 Years 

-do- 

25 Years 

15 Years 

10 Years 

14 Years 

13 Years 

28 Years 

20 Years 

15 Years 

15 Years 

5 Years 

6 Years 

3 Years 

10 Years 

 
 
 
 
 
 
 
(ii)  Laboratory equipments used in educational institutions 

XIV. 

Electrical Installations and Equipment [NESD] 

XV.  Hydraulic works, pipelines and sluices [NESD] 
Notes.— 

5 Years 

10 years 

15 Years 

1. “Factory buildings” does not include offices, godowns, staff quarters. 

2. Where, during any financial year, any addition has been made to any asset, or where any asset has been sold, 
discarded, demolished or destroyed, the depreciation on such assets shall be calculated on a pro rata basis from the 
date of such addition or, as the case may be, up to the date on which such asset has been sold, discarded, demolished 
or destroyed. 

3. The following information shall also be disclosed in the accounts, namely:— 

(i) depreciation methods used; and 

(ii) the useful lives of the assets for computing depreciation, if they are different from the life specified in the 

Schedule. 

1[4(a) Useful life specified in Part C of the Schedule is for whole of the asset and where cost of a part of the asset is significant 
to total cost of the asset and useful life of that part is different from the useful life of the remaining asset, useful life of that significant 
part shall be determined separately. 

(b) The requirement under sub-paragraph (a) shall be voluntary in respect of the financial year commencing on or 
after the 1st April, 2014 and mandatory for financial statements in respect of financial years commencing on or after 
the 1st April, 2015.] 

2* 

* 

* 

* 

* 

6. The useful lives of assets working on shift basis have been specified in the Schedule based on their single shift 
working. Except for assets in respect of which no extra shift depreciation is permitted (indicated by NESD in Part C 
above), if an asset is used for any time during the year for double shift, the depreciation will increase by 50% for that 
period and incase of the triple shift the depreciation shall be calculated on the basis of 100% for that period. 

7. From the date this Schedule comes into effect, the carrying amount of the asset as on that date— 

(a) shall be depreciated over the remaining useful life of the asset as per this Schedule; 

(b) after retaining the residual value, 3[may be recognised] in the opening balance of retained earnings where 

the remaining useful life of an asset is nil. 

8. “Continuous process plant” means a plant which is required and designed to operate for twenty-four hours a 

day. 

1. Subs. by Notification No. G.S.R. 627(E) dated 29th August 2014, for paragraph 4 (w.e.f. 29-8-2014). 
2. Paragraph 5 omitted by Notification No. G.S.R. 237(E), dated 31st March , 2014 (w.e.f. 1-4-2014). 
3. Subs. by Notification No. G.S.R. 627(E), dated 29th August 2014, for “shall be recognized” (w.e.f. 29-8-2014). 

282 

 
 
 
 
 
 
 
 
 
 
 
                                                           
SCHEDULE III 

(See section 129) 

1[Division I 

FINANCIAL STATEMENTS FOR A COMPANY WHOSE FINANCIAL STATEMENTS ARE 
REQUIRED TO COMPLY WITH THE COMPANIES (ACCOUNTING STANDARDS) RULES, 2006 

General Instructions for Preparation of Balance Sheet and Statement of Profit and Loss of a Company.] 

GENERAL INSTRUCTIONS 

1.  Where  compliance  with  the  requirements  of  the  Act  including  Accounting  Standards  as  applicable  to  the 
companies require any change in treatment or disclosure including addition, amendment, substitution or deletion in 
the head or sub-head or any changes, inter se, in the financial statements or statements forming part thereof, the same 
shall be made and the requirements of this Schedule shall stand modified accordingly. 

2. The disclosure requirements specified in this Schedule are in addition to and not in substitution of the disclosure 
requirements  specified  in  the  Accounting  Standards  prescribed  under  the  Companies  Act,  2013.  Additional 
disclosures specified in the Accounting Standards shall be made in the notes to accounts or by way of additional 
statement unless required to be disclosed on the face of the Financial Statements. Similarly, all other disclosures as 
required by the Companies Act shall be made in the notes to accounts in addition to the requirements set out in this 
Schedule. 

3. (i) Notes to accounts shall contain information in addition to that presented in the Financial Statements and 
shall provide where required (a) narrative descriptions or disaggregations of items recognised in those statements; 
and (b) information about items that do not qualify for recognition in those statements. 

(ii) Each item on the face of the Balance Sheet and Statement of Profit and Loss shall be cross-referenced to any 
related information in the notes to accounts. In preparing the Financial Statements including the notes to accounts, a 
balance shall be maintained between providing excessive detail that may not assist users of financial statements and 
not providing important information as a result of too much aggregation. 

4. (i) Depending upon the  2[Total Income] of the company, the figures appearing in the Financial Statements 

3[Shall] be rounded off as given below:— 

2[Total Income] 

Rounding off 

(a)  less than one hundred crore rupees 

(b)  one hundred crore rupees or more 

To  the  nearest  hundreds,  thousands,  lakhs  or 
millions, or decimals thereof. 

To the nearest lakhs, millions or crores, or decimals 
thereof. 

(ii) Once a unit of measurement is used, it 4[should] be used uniformly in the Financial Statements. 

5.  Except  in  the  case  of  the  first  Financial  Statements  laid  before  the  Company  (after  its  incorporation)  the 
corresponding  amounts  (comparatives)  for the immediately  preceding  reporting period for  all items  shown  in the 
Financial Statements including notes shall also be given. 

6. For the purpose of this Schedule, the terms used herein shall be as per the applicable Accounting Standards. 

Note:— This part of Schedule sets out the minimum requirements for disclosure on the face of the Balance Sheet, 
and the Statement of Profit and Loss (hereinafter referred to as “Financial Statements” for the purpose of this 
Schedule) and Notes. Line items, sub-line items and sub-totals shall be presented as an addition or substitution 

1. Subs. by G.S.R. 404(E), dated  6th April,  2016, for “GENERAL INSTURCTIONS FOR PREPARATION OF BALANCE SHEET AND STATEMENT OF PROFIT 

AND LOSS OF A COMPANY”. 

2. Subs. by G.S.R. 207(E), dated 24th March, 2021, for “Turnover” (w.e.f. 1-4-2021). 
3. Subs. by G.S.R. 207 (E), dated 24th March, 2021, for “may” (w.e.f. 1-4-2021). 
4. Subs. by Notification No. G.S.R. 1022(E), dated 11th October, 2018, for “shall” (w.e.f. 11-10-218). 

283 

 
                                                           
on  the  face  of  the  Financial  Statements  when  such  presentation  is  relevant  to  an  understanding  of  the 
company’s financial position or performance or to cater to industry/sector-specific disclosure requirements 
or  when  required  for  compliance  with  the  amendments  to  the  Companies  Act  or  under  the  Accounting 
Standards. 

PART I — BALANCE SHEET 

Name of the Company……………………. 

Balance Sheet as at ……………………… 

(Rupees in…………) 

Particulars 

1 

Note 

No. 

2 

Figures as at the 
end of current 
reporting period 

Figures as at the end 
of the previous 
reporting period 

3 

4 

I.  EQUITY AND LIABILITIES 

(1)  Shareholders’ funds 

(a)  Share capital 

(b)  Reserves and surplus 

(c)  Money received against share 

warrants 

(2)  Share  application  money  pending 

allotment 

(3)  Non-current liabilities 

(a)  Long-term borrowings 

(b)  Deferred tax liabilities (Net) 

(c)  Other Long-term liabilities 

(d)  Long-term provisions 

(4)  Current liabilities 

(a)  Short-term borrowings 

1[(b) Trade payables 

(A)  total  outstanding  dues  of 
small 

enterprises 

and 

micro 
enterprises; and 

(B)  total  outstanding  dues  of 
than  micro 

creditors 
enterprises and small enterprises.] 

other 

  (c) Other current liabilities 

(d) Short-term provisions 

TOTAL 

1. Subs. by Notification No. G.S.R. 679(E), dated 4th  September 2015, for “(b) Trade payables” (w.e.f. 4-9-2015). 

284 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
1 

2 

3 

4 

II.  ASSETS 

Non-current assets 

(1)  (a)   1[Property, Plant and Equipment 

2[and Intangible assets]] 
(i)  3[Property, 
Equipment] 
(ii)  Intangible assets 
(iii) Capital work-in-progress 

Plant 

and 

(iv) Intangible 

assets 

under 

development 

(b)  Non-current investments 
(c)  Deferred tax assets (net) 
(d)  Long-term loans and advances 
(e)  Other non-current assets 
(2)  Current assets 

(a)  Current investments 
(b)  Inventories 
(c)  Trade receivables 
(d)  Cash and cash equivalents 
(e)  Short-term loans and advances 
(f)  Other current assets 

TOTAL 

See accompanying notes to the Financial Statements. 

Notes 

GENERAL INSTRUCTIONS FOR PREPARATION OF BALANCE SHEET 

1. An asset shall be classified as current when it satisfies any of the following criteria:— 

(a) it is expected to be realised in, or is intended for sale or consumption in, the company’s normal operating 

cycle; 

(b) it is held primarily for the purpose of being traded; 

(c) it is expected to be realised within twelve months after the reporting date; or 

(d) it is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at 

least twelve months after the reporting date. 

All other assets shall be classified as non-current. 

2. An operating cycle is the time between the acquisition of assets for processing and their realisation in cash or 
cash equivalents. Where the normal operating cycle cannot be identified, it is assumed to have a duration of twelve 
months. 

3. A liability shall be classified as current when it satisfies any of the following criteria:— 

(a) it is expected to be settled in the company’s normal operating cycle; 

1. Subs. by Notification No. G.S.R. 1022(E), dated 11th October, 2018, for “Fixed assets” (w.e.f. 11-10-2018). 
2. Ins. by Notification No. G.S.R. 207(E), dated 24th March, 2021, (w.e.f. 1-4-2021).  
3. Subs. by Notification No. G.S.R. 207(E), dated 24th March, 2021, for “Tangible Assets” (w.e.f. 1-4-2021). 

285 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
(b) it is held primarily for the purpose of being traded; 

(c) it is due to be settled within twelve months after the reporting date; or 

(d) the company does not have an unconditional right to defer settlement of the liability for at least twelve 
months after the reporting date. Terms of a liability that could, at the option of the counterparty, result in its 
settlement by the issue of equity instruments do not affect its classification. 

All other liabilities shall be classified as non-current. 

4. A receivable shall be classified as a “trade receivable” if it is in respect of the amount due on account of goods 

sold or services rendered in the normal course of business. 

5. A payable shall be classified as a “trade payable” if it is in respect of the amount due on account of goods 

purchased or services received in the normal course of business. 

6. A company shall disclose the following in the notes to accounts. 

A. Share Capital 

For each class of share capital (different classes of preference shares to be treated separately): 

(a) the number and amount of shares authorised; 

(b) the number of shares issued, subscribed and fully paid, and subscribed but not fully paid; 

(c) par value per share; 

(d) a reconciliation of the number of shares outstanding at the beginning and at the end of the reporting 

period; 

(e) the rights, preferences and restrictions attaching to each class of shares including restrictions on the 

distribution of dividends and the repayment of capital; 

(f) shares in respect of each class in the company held by its holding company or its ultimate  holding 
company including shares held by or by subsidiaries or associates of the holding company or the ultimate 
holding company in aggregate; 

(g) shares in the company held by each shareholder holding more than 5 per cent. shares specifying the 

number of shares held; 

(h)  shares  reserved  for 

issue  under  options  and  contracts/commitments  for 

the  sale  of 

shares/disinvestment, including the terms and amounts; 

(i) for the period of five years immediately preceding the date as at which the Balance Sheet is prepared: 

(A) Aggregate number and class of shares allotted as fully paid-up pursuant to contract (s) without 

payment being received in cash. 

(B) Aggregate number and class of shares allotted as fully paid-up by way of bonus shares. 

(C) Aggregate number and class of shares bought back. 

(j) terms of any securities convertible into equity/preference shares issued along with the earliest date of 

conversion in descending order starting from the farthest such date; 

(k) calls unpaid (showing aggregate value of calls unpaid by directors and officers); 

(l) forfeited shares (amount originally paid-up). 

1[(m) A company shall disclose Shareholding of Promoters* as below: 

Shares held by promoters at the end of the year  % Change during the year*** 

Promoter 
name 

No. 
Shares** 

of 

%  of  total 
shares ** 

S.No 

Total 

*Promoter here means promoter as defined in the Companies Act, 2013. 

** Details shall be given separately for each class of shares 

1. Ins. by Notification No. G.S.R. 207(E), dated 24th March, 2021, (w.e.f. 1-4-2021).  

286 

 
 
 
 
 
                                                           
*** percentage change shall be computed with respect to the number at the beginning of the year or if 

issued during the year for the first time then with respect to the date of issue.] 

B. Reserves and Surplus 

(i) Reserves and Surplus shall be classified as: 

(a) Capital Reserves; 

(b) Capital Redemption Reserve; 

(c) Securities Premium 1***; 

(d) Debenture Redemption Reserve; 

(e) Revaluation Reserve; 

(f) Share Options Outstanding Account; 

(g) Other Reserves–(specify the nature and purpose of each reserve and the amount in respect thereof); 

 (h) Surplus i.e., balance in Statement of Profit and Loss disclosing allocations and appropriations such 

as dividend, bonus shares and transfer to/ from reserves, etc.; 

(Additions and deductions since last balance sheet to be shown under each of the specified heads); 

(ii) A reserve specifically represented by earmarked investments shall be termed as a “fund”. 

(iii) Debit balance of statement of profit and loss shall be shown as a negative figure under the head “Surplus”. 
Similarly, the balance of  “Reserves and Surplus”, after adjusting negative balance of surplus, if any, shall be 
shown under the head “Reserves and Surplus” even if the resulting figure is in the negative. 

C. Long-Term Borrowings 

(i) Long-term borrowings shall be classified as: 

(a) Bonds/debentures; 

(b) Term loans: 

(A) from banks. 

(B) from other parties. 

(c) Deferred payment liabilities; 

(d) Deposits; 

(e) Loans and advances from related parties; 

(f) Long term maturities of finance lease obligations; 

(g) Other loans and advances (specify nature). 

(ii) Borrowings shall further be sub-classified as secured and unsecured. Nature of security shall be specified 

separately in each case. 

(iii) Where loans have been guaranteed by directors or others, the aggregate amount of such loans under each 

head shall be disclosed. 

(iv) Bonds/debentures (along with the rate of interest and particulars of redemption or conversion, as the case 
may  be)  shall  be  stated  in  descending  order  of  maturity  or  conversion,  starting  from  farthest  redemption  or 
conversion date, as the case may be. Where bonds/debentures are redeemable by instalments, the date of maturity 
for this purpose must be reckoned as the date on which the first instalment becomes due. 

1. The word “Reserve” omitted by Notification No. G.S.R.1022(E), dated 11th October, 2018 (w.e.f. 11-10-2018). 

287 

 
                                                           
(v) Particulars of any redeemed bonds/debentures which the company has power to reissue shall be disclosed. 

(vi) Terms of repayment of term loans and other loans shall be stated. 

(vii) Period and amount of continuing default as on the balance sheet date in repayment of loans and interest, 

shall be specified separately in each case. 

D. Other Long-term Liabilities 

Other Long-term Liabilities shall be classified as: 

(a) Trade payables; 

(b) Others. 

E. Long-term provisions 

The amounts shall be classified as: 

(a) Provision for employee benefits; 

(b) Others (specify nature). 

F. Short-term borrowings 

(i) Short-term borrowings shall be classified as: 

(a) Loans repayable on demand; 

(A) from banks. 

(B) from other parties. 

(b) Loans and advances from related parties; 

(c) Deposits; 

(d) Other loans and advances (specify nature). 

(ii) Borrowings shall further be sub-classified as secured and unsecured. Nature of security shall be specified 

separately in each case. 

(iii) Where loans have been guaranteed by directors or others, the aggregate amount of such loans under each 

head shall be disclosed. 

(iv) Period and amount of default as on the balance sheet date in repayment of loans and interest, shall be 

specified separately in each case. 

1[(v) current maturities of Long term borrowings shall be disclosed separately.] 

2[FA. Trade Payable:— 

The following details relating to Micro, Small and Medium Enterprises shall be disclosed in the notes:  

(a) the principal amount and the interest due thereon (to  be shown separately) remaining unpaid to any 

supplier at the end of each accounting year; 

(b) the amount of interest paid by the buyer in terms of section 16 of the Micro, Small and Medium 
Enterprises Development Act, 2006 (7 of 2006), along with the amount of the payment made to the supplier 
beyond the appointed day during each accounting year; 

(c) the amount of interest due and payable for the period of delay in making payment (which have been 
paid but beyond the appointed day during the year) but without adding the interest specified under the Micro, 
Small and Medium Enterprises Development Act, 2006; 

(d) the amount of interest accrued and remaining unpaid at the end of each accounting year; and 

(e) the amount of further interest remaining due and payable even in the succeeding years, until such date 
when the interest dues above are actually paid to the small enterprise, for the purpose of disallowance of a 
deductible  expenditure  under  section  23  of  the  Micro,  Small  and  Medium  Enterprises  Development  Act, 
2006; 

1. Ins. by Notification No. G.S.R. 207(E), dated 24th March, 2021, (w.e.f. 1-4-2021). 
2. Ins. by Notification No. G.S.R. 679(E), dated 4th September, 2015 (w.e.f. 4-9-2015). 

288 

 
                                                           
Explanation.-The terms 'appointed day’, ‘buyer’, ‘enterprise’, ‘micro enterprise’, ‘small enterprise’ and 
‘supplier’,  shall  have  the  same  meaning  assigned  to  those  under  clauses  (b),  (d),  (e),  (h),  (m)  and  (n) 
respectively of section 2 of the Micro, Small and Medium Enterprises Development Act, 2006.] 

1[FB. Trade payables due for payment 

The following ageing schedule shall be given for Trade payable due for payment:- 

Trade Payables ageing schedule 

Particulars 

Outstanding for following periods from due date of 
payment# 

Less  than 
1 year 

1-2 
years 

2-3 years  More 
years 

than  3 

Total 

(i) MSME 

(ii) Others 

(iii) Disputed dues 

MSME 

(iv) Disputed dues-
others 

#similar information shall be given where no due date of payment is specified in that case disclosure shall be 

from the date of the transaction. 

Unbilled dues shall be disclosed separately;] 

G. Other current liabilities 

The amounts shall be classified as: 

2*** 

(b) Current maturities of finance lease obligations; 

(c) Interest accrued but not due on borrowings; 

(d) Interest accrued and due on borrowings; 

(e) Income received in advance; 

(f) Unpaid dividends; 

(g)  Application  money  received  for  allotment  of  securities  and  due  for  refund  and  interest  accrued 
thereon.  Share  application  money  includes  advances  towards  allotment  of  share  capital.  The  terms  and 
conditions including the number of shares proposed to be issued, the amount of premium, if any, and the 
period before which shares shall be allotted shall be disclosed. It shall also be disclosed whether the company 
has sufficient authorised capital to cover the share capital amount resulting from allotment of shares out of 
such share application money. Further, the period for which the share application money has been pending 
beyond the period for allotment as mentioned in the document inviting application for shares along with the 
reason  for  such  share  application  money  being  pending  shall  be  disclosed.  Share  application  money  not 
exceeding the issued capital and to the extent not refundable shall be shown under the head Equity and share 
application  money  to  the  extent  refundable,  i.e.,  the  amount  in  excess  of  subscription  or  in  case  the 
requirements  of  minimum  subscription  are  not  met,  shall  be  separately  shown  under  “Óther  current 
liabilities”; 

(h) Unpaid matured deposits and interest accrued thereon; 

(i) Unpaid matured debentures and interest accrued thereon; 

(j) Other payables (specify nature). 

H. Short-term provisions 

1. Ins. by Notification No. G.S.R. 207(E), dated 24th March, 2021, (w.e.f. 1-4-2021). 
2. Item (a) omitted by Notification No. G.S.R. 207(E), dated 24th March, 2021 (w.e.f. 1-4-2021). 

289 

 
 
 
 
 
 
 
                                                           
The amounts shall be classified as: 

(a) Provision for employee benefits. 

 (b) Others (specify nature). 

I. 1[Property, Plant and Equipment] 

(i) Classification shall be given as: 

(a) Land; 

(b) Buildings; 

(c) Plant and Equipment; 

(d) Furniture and Fixtures; 

(e) Vehicles; 

(f) Office equipment; 

(g) Others (specify nature). 

(ii) Assets under lease shall be separately specified under each class of asset. 

2[(iii) A reconciliation of the gross and net carrying amounts of each class of assets at the beginning and end 
of  the  reporting  period  showing  additions,  disposals,  acquisitions  through  business  combinations,  amount  of 
change due to revaluation (if change is 10% or more in the aggregate of the net carrying value of each class of 
Property,  Plant  and  Equipment)  and  other  adjustments  and  the  related  depreciation  and  impairment 
losses/reversals shall be disclosed separately.]  

(iv) Where sums have been written-off on a reduction of capital or revaluation of assets or where sums have 
been added on revaluation of assets, every balance sheet subsequent to date of such write-off, or addition shall 
show  the reduced  or increased figures  as  applicable and  shall  by  way  of a  note  also  show  the  amount  of the 
reduction or increase as applicable together with the date thereof for the first five years subsequent to the date of 
such reduction or increase. 

J. Intangible assets 

(i) Classification shall be given as: 

(a) Goodwill; 

(b) Brands /trademarks; 

(c) Computer software; 

(d) Mastheads and publishing titles; 

(e) Mining rights; 

(f) Copyrights, and patents and other intellectual property rights, services and operating rights; 

(g) Recipes, formulae, models, designs and prototypes; 

(h) Licences and franchise; 

(i) Others (specify nature). 

3[(ii) A reconciliation of the gross and net carrying amounts of each class of assets at the beginning and end 
of  the  reporting  period  showing  additions,  disposals,  acquisitions  through  business  combinations,  amount  of 
change due to revaluation (if change is 10% or more in the aggregate of the net carrying value of each class of 

1. Subs. by Notification No. G.S.R. 207(E), dated 24th March, 2021, for “Tangible Assets” (w.e.f. 1-4-2021) 
2. Subs. by Notification No. G.S.R. 207(E), dated 24th March, 2021, for item (iii) (w.e.f. 1-4-2021). 
3. Subs. by Notification No. G.S.R. 207(E), dated 24th March, 2021, for item (ii) (w.e.f. 1-4-2021). 

290 

 
 
                                                           
intangible assets) and other adjustments and the related depreciation and impairment losses or reversals shall be 
disclosed separately.] 

(iii) Where sums have been written-off on a reduction of capital or revaluation of assets or where sums have 
been added on revaluation of assets, every balance sheet subsequent to date of such write-off, or addition shall 
show  the reduced  or increased figures  as  applicable and  shall  by  way  of a  note  also  show  the  amount  of the 
reduction or increase as applicable together with the date thereof for the first five years subsequent to the date of 
such reduction or increase. 

K. Non-current investments 

(i)  Non-current  investments  shall  be  classified  as  trade  investments  and  other  investments  and  further 

classified as: 

(a) Investment property; 

(b) Investments in Equity Instruments; 

(c) Investments in preference shares; 

(d) Investments in Government or trust securities; 

(e) Investments in debentures or bonds; 

(f) Investments in Mutual Funds; 

(g) Investments in partnership firms; 

(h) Other non-current investments (specify nature). 

Under  each  classification,  details  shall  be  given  of  names  of  the  bodies  corporate  indicating  separately 
whether  such  bodies  are  (i)  subsidiaries,  (ii)  associates,(iii)  joint  ventures,  or  (iv)  controlled  special  purpose 
entities in whom investments have been made and the nature and extent of the investment so made in each such 
body corporate (showing separately investments which are partly-paid). In regard to investments in the capital of 
partnership firms, the names of the firms (with the names of all their partners, total capital and the shares of each 
partner) shall be given. 

(ii) Investments carried at other than at cost should be separately stated specifying the basis for valuation 

thereof; 

(iii) The following shall also be disclosed: 

(a) Aggregate amount of quoted investments and market value thereof; 

(b) Aggregate amount of unquoted investments; 

(c) Aggregate provision for diminution in value of investments. 

L. Long-term loans and advances 

(i) Long-term loans and advances shall be classified as: 

(a) Capital Advances; 

1*** 

(c) Loans and advances to related parties (giving details thereof); 

(d) Other loans and advances (specify nature). 

(ii) The above shall also be separately sub-classified as: 

(a) Secured, considered good; 

(b) Unsecured, considered good; 

(c) Doubtful. 

(iii)  Allowance  for  bad  and  doubtful  loans  and  advances  shall  be  disclosed  under  the  relevant  heads 

separately. 

1. Sub-item (b) omitted by Notification No. G.S.R. 207(E), dated 24th March, 2021 (w.e.f. 1-4-2021).  

291 

 
                                                           
(iv) Loans and advances due by directors or other officers of the company or any of them either severally or 
jointly with any other persons or amounts due by firms or private companies respectively in which any director 
is a partner or a director or a member should be separately stated. 

M. Other non-current assets 

Other non-current assets shall be classified as: 

(i) Long-term Trade Receivables (including trade receivables on deferred credit terms); 

1[(ia) Security Deposits;] 

(ii) Others (specify nature); 

(iii) Long term Trade Receivables, shall be sub-classified as: 

(A) (a) Secured, considered good; 

(B) Unsecured, considered good; 

(C) Doubtful. 

(b) Allowance for bad and doubtful debts shall be disclosed under the relevant heads separately. 

(c) Debts due by directors or other officers of the company or any of them either severally or jointly 
with any other person or debts due by firms or private companies respectively in which any director is a 
partner or a director or a member should be separately stated. 

                   1[(iv) For trade receivables outstanding, following ageing schedule shall be given: 

                          Trade Receivables ageing schedule 

Particulars 

Outstanding for following periods from due date of payment# 

Less than 6 
months 

6  months-
1 year 

1-2 years 

2-3 
years 

More  than  3 
years 

Total 

(Amount in Rs.) 

(i)  Undisputed  Trade 
receivables-considered 
good 

(ii)  Undisputed  Trade 
Receivables-
considered doubtful 

(iii)  Disputed  Trade 
Receivables 
considered good 

(iv)  Disputed  Trade 
Receivables 
considered doubtful 

                            #similar information shall be given where no due date of payment is specified, in that case disclosure 

shall be from the date of the transaction. 

            Unbilled dues shall be disclosed separately.] 

N. Current Investments 

(i) Current investments shall be classified as: 

(a) Investments in Equity Instruments; 

(b) Investments in Preference Shares; 

(c) Investments in Government or trust securities; 

(d) Investments in debentures or bonds; 

(e) Investments in Mutual Funds; 

1. Ins. by Notification No. G.S.R. 207(E), dated 24th March, 2021, (w.e.f. 1-4-2021). 

292 

 
 
 
 
 
 
 
 
                                                           
(f) Investments in partnership firms; 

(g) Other investments (specify nature). 

Under  each  classification,  details  shall  be  given  of  names  of  the  bodies  corporate  [indicating  separately 
whether such bodies are: (i) subsidiaries, (ii) associates, (iii) joint ventures, or (iv) controlled special purpose 
entities] in whom investments have been made and the nature and extent of the investment so made in each such 
body corporate (showing separately investments which are partly paid). In regard to investments in the capital of 
partnership firms, the names of the firms (with the names of all their partners, total capital and the shares of each 
partner) shall be given. 

(ii) The following shall also be disclosed: 

(a) The basis of valuation of individual investments; 

(b) Aggregate amount of quoted investments and market value thereof; 

(c) Aggregate amount of unquoted investments; 

(d) Aggregate provision made for diminution in value of investments. 

O. Inventories 

(i) Inventories shall be classified as: 

(a) Raw materials; 

(b) Work-in-progress; 

(c) Finished goods; 

(d) Stock-in-trade (in respect of goods acquired for trading); 

(e) Stores and spares; 

(f) Loose tools; 

(g) Others (specify nature). 

(ii) Goods-in-transit shall be disclosed under the relevant sub-head of inventories. 

(iii) Mode of valuation shall be stated. 

P. Trade Receivables 

1[(i) For trade receivables outstanding, the following ageing schedules shall be given: 

Trade Receivables ageing schedule 

Particulars 

Outstanding for following periods from due date of payment# 

Less than 6 
months 

6  months-
1 year 

1-2  
years 

2-3 
years 

More  than  3 
years 

Total 

(Amount in Rs.) 

(i) 
Undisputed 
receivables-considered 
good 

Trade 

(ii)  Undisputed 
Receivables-considered 
doubtful 

Trade 

Disputed 

(iii) 
Receivables 
good 

Trade 
considered 

Disputed 

(iv) 
Receivables 
doubtful 

Trade 
considered 

1. Subs. by Notification No. G.S.R. 207(E), dated 24th March, 2021, for item (i) (w.e.f. 1-4-2021). 

293 

 
 
 
 
 
 
 
 
                                                           
#similar information shall be given where no due date of payment is specified in that case disclosure shall be 

from the date of the transaction. 

Unbilled dues shall be disclosed separately.] 

(ii) Trade receivables shall be sub-classified as: 

(a) Secured, considered good; 

(b) Unsecured, considered good; 

(c) Doubtful. 

(iii) Allowance for bad and doubtful debts shall be disclosed under the relevant heads separately. 

(iv) Debts due by directors or other officers of the company or any of them either severally or jointly with 
any other person or debts due by firms or private companies respectively in which any director is a partner or a 
director or a member should be separately stated. 

Q. Cash and cash equivalents 

(i) Cash and cash equivalents shall be classified as: 

(a) Balances with banks; 

(b) Cheques, drafts on hand; 

(c) Cash on hand; 

(d) Others (specify nature). 

(ii) Earmarked balances with banks (for example, for unpaid dividend) shall be separately stated. 

(iii) Balances with banks to the extent held as margin money or security against the borrowings, guarantees, 

other commitments shall be disclosed separately. 

(iv) Repatriation restrictions, if any, in respect of cash and bank balances shall be separately stated. 

(v) Bank deposits with more than twelve months maturity shall be disclosed separately. 

R. Short-term loans and advances 

(i) Short-term loans and advances shall be classified as: 

(a) Loans and advances to related parties (giving details thereof); 

(b) Others (specify nature). 

(ii) The above shall also be sub-classified as: 

(a) Secured, considered good; 

(b) Unsecured, considered good; 

(c) Doubtful. 

(iii)  Allowance  for  bad  and  doubtful  loans  and  advances  shall  be  disclosed  under  the  relevant  heads 

separately. 

 (iv) Loans and advances due by directors or other officers of the company or any of them either severally or 
jointly with any other person or amounts due by firms or private companies respectively in which any director is 
a partner or a director or a member shall be separately stated. 

S. Other current assets (specify nature) 

This  is  an  all-inclusive  heading,  which  incorporates  current  assets  that  do  not  fit  into  any  other  asset 

categories. 

T. Contingent liabilities and commitments (to the extent not provided for) 

(i) Contingent liabilities shall be classified as: 

(a) Claims against the company not acknowledged as debt; 

(b) Guarantees; 

(c) Other money for which the company is contingently liable. 

294 

 
(ii) Commitments shall be classified as: 

(a) Estimated amount of contracts remaining to be executed on capital account and not provided for; 

(b) Uncalled liability on shares and other investments partly paid; 

(c) Other commitments (specify nature). 

U. The amount of dividends proposed to be distributed to equity and preference shareholders for the period 
and  the  related  amount  per  share  shall  be  disclosed  separately.  Arrears  of  fixed  cumulative  dividends  on 
preference shares shall also be disclosed separately. 

V. Where in respect of an issue of securities made for a specific purpose, the whole or part of the amount has 
not been used for the specific purpose at the balance sheet date, there shall be indicated by way of note how such 
unutilised amounts have been used or invested. 

1[VA. Where the company has not used the borrowings from banks and financial institutions for the specific 
purpose for which it was taken at the balance sheet date, the company shall disclose the details of where they 
have been used.] 

W. If, in the opinion of the Board, any of the assets other than 2[Property, Plant and Equipment] 3[,Intangible 
assets] and non-current investments do not have a value on realisation in the ordinary course of business at least 
equal to the amount at which they are stated, the fact that the Board is of that opinion, shall be stated. 

    4*                                    *                                          *                                        *                             * 

5[Y. Additional Regulatory Information 

(i) Title deeds of Immovable Property not held in name of the Company 

The company shall provide the details of all the immovable property (other than properties where the Company is 
the lessee and the lease agreements are duly executed in favour of  the lessee) whose title deeds are not held in the 
name of the company in format given below and where such immovable property is jointly held with others, details 
are required to be given to the extent of the company’s share. 

Relevant line item 
in the Balance 
sheet 

Description 
of item of 
property 

Gross 
carrying 
value 

Title deeds 
held in the 
name of 

Whether title deed 
holder is a 
promoter, director 
or relative# of 
promoter*/director 
or employee of 
promoter/director 

Property 
held since 
which date 

Reason for 
not being 
held in the 
name of the 
company** 

- 

- 

- 

- 

** also 
indicate if in 
dispute 

Land 
Building 

Land 
Building 

Land 
Building 

PPE- 

Investment 
property- 

PPE retired from 
active use and held 
for disposal - 

others 

#Relative here means relative as defined in the Companies Act, 2013. 

*Promoter here means promoter as defined in the Companies Act, 2013. 

1. Ins. by Notification No. G.S.R. 207(E), dated 24th March, 2021, (w.e.f. 1-4-2021). 
2. Subs. by Notification No. G.S.R. (E), dated 11th October, 2018, for “fixed assets” (w.e.f.  11-10-2018). 
3. Ins. by Notification No. G.S.R. 207(E), dated 24th March, 2021, (w.e.f. 1-4-2021). 
4. Heading “X” omitted by Notification No. G.S.R. 207(E), dated 24th March, 2021, (w.e.f. 1-4-2021). 
5. Ins. by Notification No. G.S.R. 207(E), dated 24th March, 2021, (w.e.f. 1-4-2021). 

295 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
(ii)Where the Company has revalued its Property, Plant and Equipment, the company shall disclose as to whether 
the revaluation is based on the valuation by a registered valuer as defined under rule 2 of the Companies (Registered 
Valuers and Valuation) Rules, 2017. 

(iii) Following disclosures shall be made where Loans or Advances in the nature of loans are granted to promoters, 
directors, KMPs and the related parties (as defined under Companies Act, 2013,) either serverally or jointly with any 
other person, that are: 

(a) repayable on demand or 

(b) without specifying any terms or period of repayment 

Type of Borrower 

Amount of loan or advance in 
the nature of loan outstanding 

Percentage to the total Loans and Advances in 
the nature of loans 

Promoters 

Directors 

KMPs 

Related Parties 

(iv) Capital-Work-in Progress (CWIP) 

(a) For Capital-work-in progress, following ageing schedule shall be given: 

CWIP aging schedule 

CWIP 

Amount in CWIP for a period of 

Less than 1 
year 

1-2 years 

2-3 years 

More than 3 years 

(Amount in Rs.) 

Total* 

Projects in 
progress 

Projects 
temporarily 
suspended 

*Total shall tally with CWIP amount in the balance sheet. 

(b) For capital-work-in progress, whose completion is overdue or has exceeded its cost compared to its original 

plan, following CWIP completion schedule shall be given**: 

To be completed in 

(Amount in Rs.) 

Less than 1 year 

1-2 years 

2-3 years 

More than 3 years 

CWIP 

Project 1 
Project 2” 

** Details of projects where actively has been suspended shall be given separately. 

(v) Intangible assets under development: 

(a) For Intangible assets under development, following ageing schedule shall be given: 

Intangible assets under development aging schedule 

Amount in CWIP for a period of 

296 

(Amount in Rs.) 

Total* 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1-2 years  2-3 years 

More than 3 years 

Intangible assets under 
development 

Less than 1 
year 

Projects in progress 

Projects temporarily 
suspended 

 *Total shall tally with the amount of Intangible assets under development in the balance sheet. 

(b) For Intangible assets under development, whose completion is overdue or has exceeded its cost compared to its 
original plan, following Intangible assets under development completion schedule shall be given**: 

To be completed in 

(Amount in Rs.) 

Less than 1 year 

1-2 years 

2-3 years 

More than 3 years 

Intangible assets 
under development 

Project 1 

Project 2 

** Details of projects where activity has been suspended shall be given separately. 

(vi) Details of Benami Property held 

Where any proceedings have been initiated or pending against the company for holding any benami 
property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and the rules made 
thereunder, the company shall disclose the following:- 

         (a) Details of such property, including year of acquisition, 

         (b) Amount thereof, 

         (c) Details of Beneficiaries, 

         (d) If property is in the books, then reference to the item in the Balance Sheet, 

         (e) If property is not in the books, then the fact shall be stated with reasons, 

         (f) Where there are proceedings against the company under this law as an abetter of the transaction or as the 

transferor then the details shall be provided, 

         (g) Nature of proceedings, status of same and company’s view on same. 

(vii) Where the Company has borrowings from banks or financial institutions on the basis of security of current 
assets, it shall disclose the following:- 

(a) whether quarterly returns or statements of current assets filed by the Company with banks or financial 

institutions are in agreement with the books of accounts. 

(b) if not, summary of reconciliation and reasons of material discrepancies, if any to be adequately disclosed. 

(viii) Wilful Defaulter* 

Where a company is a declared willful defaulter by any bank or financial Institution or other lender, following 

details shall be given: 

(a) Date of declaration as willful defaulter, 

(b) Details of defaults (amount and nature of defaults), 

* “willful defaulter” here means a person or an issuer who or which is categorized as a willful defaulter by any 
bank or financial institution (as defined under the Act) or consortium thereof, in accordance with the guidelines on 
willful  defaulters issued by the Reserve Bank of India. 

(ix) Relationship with Struck off Companies 

297 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Where the company has any transactions with companies struck off under section 248 of the Companies Act, 

2013 or section 560 of Companies Act, 1956, the Company shall disclose the following details:- 

Name of struck off 
Company 

Nature of transactions 
with struck off Company 

Balance 
outstanding 

Relationship with the Struck off 
company, if any, to be disclosed 

Investments in securities 

Receivables 

Payables 

Shares held by stuck off 
company 

Other outstanding 
balances (to be specified) 

(x) Registration of charges or satisfaction with Registrar of Companies 

Where any charges or satisfaction yet to be registered with Registrar of Companies beyond the statutory period, 

details and reasons thereof shall be disclosed. 

(xi) Compliance with number of layers of companies 

Where the company has not complied with the number of layers prescribed under clause (87) of section 2 of the 

Act read with Companies (Restriction on number of Layers) Rules, 2017, the name and CIN of the companies 
beyond the specified layers and the relationship/extent of holding of the company in such downstream companies 
shall be disclosed. 

(xii) Following Ratios to be disclosed:- 

(a) Current Ratio, 

(b) Debt-Equity Ratio, 

(c) Debt Service Coverage Ratio, 

(d) Return on Equity Ratio, 

(e) Inventory turnover ratio, 

(f) Trade Receivables turnover ratio, 

(g) Trade payables turnover ratio, 

(h) Net capital turnover ratio, 

(i) Net profit ratio, 

(j) Return on Capital employed, 

(k) Return on investment. 

The company shall explain the items included in numerator and denominator for computing the above ratios. 
Further explanation shall be provided for any change in the ratio by more than 25% as compared to the preceding 
year. 

(xiii) Compliance with approved Scheme(s) of Arrangements 

Where any Scheme of Arrangements has been approved by the Competent Authority in terms of sections 230 
to 237 of the Companies Act, 2013, the Company shall disclose that the effect of such Scheme of Arrangements 
have  been  accounted  for  in  the  books  of  account  of  the  Company  ‘in  accordance  with  the  Scheme’  and  ‘in 
accordance with accounting standards’ and deviation in this regard shall be explained.   

(xiv) Utilisation of Borrowed funds and share premium: 

(A) Where company has advanced or loaned or invested funds (either borrowed funds or share premium or 
any other sources or kind of funds) to any other person(s) or entity (ies), including foreign entities (Intermediaries) 
with the understanding (whether recorded in writing or otherwise) that the Intermediary shall 

298 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(i) 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 

(ii) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries; 

the company shall disclose the following:- 

(I) date and amount of fund advanced or loaned or invested in Intermediaries with complete details of 

each Intermediary. 

(II)  date  and  amount  of  fund  further  advanced  or  loaned  or  invested  by  such  Intermediaries  to  other 

intermediaries or Ultimate Beneficiaries alongwith complete details of the ultimate beneficiaries. 

(III)  date  and  amount  of  guarantee,  security  or  the  like  provided  to  or  on  behalf  of  the  Ultimate 

Beneficiaries. 

(IV) declaration that relevant provisions of the Foreign Exchange Management Act, 1999 (42 of 1999) 
and Companies Act has been complied with for such transactions and the transactions are not violative of the 
Prevention of Money-Laundering act, 2002 (15 of 2003); 

(B) Where a company has received any fund from any persons (s) or entity(ies), including foreign entities 

(Funding Party) with the understanding (whether recorded in writing or otherwise) that the company shall 

(i) 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 

(ii) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries, the company shall 

disclose the following:- 

(I) date and amount of fund received from Funding parties with complete details of each Funding party. 

(II)  date and  amount  of fund  further  advanced or  loaned  or invested other  intermediaries  or  Ultimate 

Beneficiaries alongwith complete details of the other intermediaries’ or ultimate beneficiaries. 

(III)  date  and  amount  of  guarantee,  security  or  the  like  provided  to  or  on  behalf  of  the  Ultimate 

Beneficiaries 

(IV) declaration that relevant provisions of the Foreign Exchange Management Act, 1999 (42 of 1999) 
and Companies Act has been complied with for such transactions and the transactions are not violative of the 
Prevention of Money-Laundering act, 2002 (15 of 2003).] 

PART II – STATEMENT OF PROFIT AND LOSS 

Name of the Company……………………. 

Profit and loss statement for the year ended ……………………… 

(Rupees in…………) 

Figures as at the end 
of current reporting 
period 

Figures as at the end 
of the previous 
reporting period 

3 

xxx 

xxx 

xxx 

4 

xxx 

xxx 

xxx 

Particulars 

1 

Note 

No. 

2 

I.  Revenue from operations 

II.  Other income 

III.  Total 1[Income] (I + II) 

IV.  Expenses: 

Cost of materials consumed 

Purchases of Stock-in-Trade 

1. Subs. by Notification No. G.S.R. 207(E), dated 24th March, 2021, for “Revrnue” (w.e.f. 1-4-2021). 

299 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
 
Changes in inventories of 

finished goods 

work-in-progress and 

Stock-in-Trade 

Employee benefits expense 

and 

amortisation 

Finance costs 

Depreciation 
expense 

Other expenses 

1 

Total expenses 

V.  Profit  before  exceptional  and 
extraordinary  items  and  tax  (III  - 
IV) 

VI.  Exceptional items 

VII.  Profit  before  extraordinary  items 

and tax (V - VI) 

VIII.  Extraordinary items 

IX.  Profit before tax (VII- VIII) 

X.  Tax expense: 

(1)  Current tax 

(2)  Deferred tax 

XI.  Profit  (Loss)  for  the  period  from 
continuing operations (VII-VIII) 

XII.  Profit/(loss) 

from  discontinuing 

operations 

XIII.  Tax  expense  of  discontinuing 

operations 

XIV.  Profit/(loss)  from  Discontinuing 

operations (after tax) (XII-XIII) 

XV.  Profit  (Loss)  for  the  period  (XI  + 

XIV) 

XVI.  Earnings per equity share: 

(1)  Basic 

(2)  Diluted 

xxx 

xxx 

xxx 

xxx 

3 

xxx 

xxx 

xxx 

xxx 

xxx 

xxx 

xxx 

xxx 

xxx 

xxx 

xxx 

xxx 

xxx 

xxx 

xxx 

2 

300 

xxx 

xxx 

xxx 

xxx 

4 

xxx 

xxx 

xxx 

xxx 

xxx 

xxx 

xxx 

xxx 

xxx 

xxx 

xxx 

xxx 

xxx 

xxx 

xxx 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes to the financial statements. 

GENERAL INSTRUCTIONS FOR PREPARATION OF STATEMENT OF 

PROFIT AND LOSS 

1. The provisions of this Part shall apply to the income and expenditure account referred to in            sub-clause 

(ii) of clause (40) of section 2 in like manner as they apply to a statement of profit and loss. 

2. (A) In respect of a company other than a finance company revenue from operations shall disclose separately in 

the notes revenue from— 

(a) Sale of products; 

(b) Sale of services; 

1[(ba) Grants or donations received (relevant in case of section 8 companies only)] 

(c) Other operating revenues; 

Less: 

(d) Excise duty. 

(B) In respect of a finance company, revenue from operations shall include revenue from— 

(a) Interest; and 

(b) Other financial services. 

Revenue under each of the above heads shall be disclosed separately by way of notes to accounts to the extent 

applicable. 

3. Finance Costs 

Finance costs shall be classified as: 

(a) Interest expense; 

(b) Other borrowing costs; 

(c) Applicable net gain/loss on foreign currency transactions and translation. 

4. Other income 

Other income shall be classified as: 

(a) Interest Income (in case of a company other than a finance company); 

(b) Dividend Income; 

(c) Net gain/loss on sale of investments; 

(d) Other non-operating income (net of expenses directly attributable to such income). 

5. Additional Information 

A Company shall disclose by way of notes additional information regarding aggregate expenditure and income 

on the following items:— 

(i) (a) Employee Benefits Expense [showing separately (i) salaries and wages, 

(ii) contribution to provident and other funds, (iii) expense on Employee Stock Option Scheme (ESOP) and 

Employee Stock Purchase Plan (ESPP), (iv) staff welfare expenses]. 

(b) Depreciation and amortisation expense; 

(c)  Any  item  of  income  or  expenditure  which  exceeds  one  per  cent.  of  the  revenue  from  operations  or 

Rs.1,00,000, whichever is higher; 

1. Ins. by Notification No. G.S.R. 207(E), dated 24th March, 2021, (w.e.f. 1-4-2021). 

301 

 
                                                           
(d) Interest Income; 

 (e) Interest expense; 

(f) Dividend income; 

(g) Net gain/loss on sale of investments; 

(h) Adjustments to the carrying amount of investments; 

(i) Net gain or loss on foreign currency transaction and translation (other than considered as finance cost); 

(j)  Payments  to  the  auditor  as  (a)  auditor;  (b)  for  taxation  matters;  (c)  for  company  law  matters;  (d)  for 

management services; (e) for other services; and (f) for reimbursement of expenses; 

(k)  In  case  of  Companies covered under section  135,  amount  of expenditure incurred on corporate  social 

responsibility activities; 

(l) Details of items of exceptional and extraordinary nature; 

(m) Prior period items; 

(ii) (a) In the case of manufacturing companies,— 

(1) Raw materials under broad heads. 

(2) goods purchased under broad heads. 

(b) In the case of trading companies, purchases in respect of goods traded in by the company under broad 

heads. 

(c) In the case of companies rendering or supplying services, gross income derived from services rendered or 

supplied under broad heads. 

(d) In the case of a company, which falls under more than one of the categories mentioned in (a), (b) and (c) 
above, it shall be sufficient compliance with the requirements herein if purchases, sales and consumption of raw 
material and the gross income from services rendered is shown under broad heads. 

(e) In the case of other companies, gross income derived under broad heads. 

(iii) In the case of all concerns having works in progress, works-in-progress under broad heads. 

(iv) (a) The aggregate, if material, of any amounts set aside or proposed to be set aside, to reserve, but not 
including provisions made to meet any specific liability, contingency or commitment known to exist at the date 
as to which the balance sheet is made up. 

(b) The aggregate, if material, of any amounts withdrawn from such reserves. 

(v) (a) The aggregate, if material, of the amounts set aside to provisions made for meeting specific liabilities, 

contingencies or commitments. 

(b) The aggregate, if material, of the amounts withdrawn from such provisions, as no longer required. 

(vi) Expenditure incurred on each of the following items, separately for each item:— 

(a) Consumption of stores and spare parts; 

(b) Power and fuel; 

(c) Rent; 

(d) Repairs to buildings; 

(e) Repairs to machinery; 

(f) Insurance; 

(g) Rates and taxes, excluding, taxes on income; 

302 

 
(h) Miscellaneous expenses, 

(vii) (a) Dividends from subsidiary companies. 

(b) Provisions for losses of subsidiary companies. 

(viii) The profit and loss account shall also contain by way of a note the following information, namely:— 

(a) Value of imports calculated on C.I.F basis by the company during the financial year in respect of— 

I. Raw materials; 

II. Components and spare parts; 

III. Capital goods; 

(b)  Expenditure  in  foreign  currency  during  the  financial  year  on  account  of  royalty,  know-how, 

professional and consultation fees, interest, and other matters; 

(c) Total value if all imported raw materials, spare parts and components consumed during the financial 
year and the total value of all indigenous raw materials, spare parts and components similarly consumed and 
the percentage of each to the total consumption; 

(d) The amount remitted during the year in foreign currencies on account of dividends with a specific 
mention of the total number of non-resident shareholders, the total number of shares held by them on which 
the dividends were due and the year to which the dividends related; 

(e) Earnings in foreign exchange classified under the following heads, namely:— 

I. Export of goods calculated on F.O.B. basis; 

II. Royalty, know-how, professional and consultation fees; 

III. Interest and dividend; 

IV. Other income, indicating the nature thereof. 

Note:— Broad heads shall be decided taking into account the concept of materiality and presentation of true and 

fair view of financial statements. 

1[(ix) Undisclosed income:- 

The Company shall give details of any transaction not recorded in the books of accounts that has been surrendered 
or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or 
survey or any other relevant provisions of the Income Tax Act, 1961), unless there is immunity for disclosure under 
any scheme and also shall state whether the previously unrecorded income and related assets have been properly 
recorded in the books of account during the year.; 

(x) Corporate Social Responsibility (CSR) 

Where the company covered under section 135 of the companies act, the following shall be disclosed with regard 

to CSR activities:- 

(a) amount required to be spent by the company during the year, 

(b) amount of expenditure incurred, 

(c) shortfall at the end of the year, 

(d) total of previous years shortfall,  

(e) reason for shortfall, 

(f) nature of CSR activities 

(g) details of related party transactions, e.g., contribution to a trust controlled by the company in relation to CSR 

expenditure as per relevant Accounting Standard, 

(h) where a provision is made with respect to a liability incurred by entering into a contractual obligation, the 

movements in the provision during the year should be shown separately. 

1. Ins. by Notification No. G.S.R. 207(E), dated 24th March, 2021, (w.e.f. 1-4-2021). 

303 

 
                                                           
(xi) Details of Crypto Currency of Virtual Currency 

Where the Company has traded or invested in Crypto currency or Virtual Currency during the financial year, the 

following shall be disclosed:- 

(a) profit or loss on transactions involving Crypto currency or Virtual Currency 

(b) amount or currency held as at the reporting date, 

(c)  deposits  or  advances  from  any  person  for  the  purpose  of  trading  or  investing  in  Crypto  Currency/virtual 

currency.] 

GENERAL INSTRUCTIONS FOR THE PREPARATION OF CONSOLIDATED 
FINANCIAL STATEMENTS 

1. Where a company is required to prepare Consolidated Financial Statements, i.e., consolidated balance sheet 
and consolidated statement of profit and loss, the company shall  mutatis mutandis follow the requirements of this 
Schedule as applicable to a company in the preparation of balance sheet and statement of profit and loss. In addition, 
the consolidated financial statements shall disclose the information as per the requirements specified in the applicable 
Accounting Standards including the following: 

(i) Profit or loss attributable to “minority interest” and to owners of the parent in the statement of profit and 

loss shall be presented as allocation for the period. 

(ii) “Minority interests” in the balance sheet within equity shall be presented separately from the equity of 

the owners of the parent. 

2. In Consolidated Financial Statements, the following shall be disclosed by way of additional information: 

Name of the entity in 
the 

Net Assets, i.e., total assets minus total 
liabilities 

Share in profit or loss 

As % of 
consolidated net 
assets 

Amount 

As % of 
consolidated profit 
or loss 

Amount 

2 

3 

4 

5 

1 

Parent 
Subsidiaries 
Indian 

1. 

2. 

3. 

. 

. 

Foreign 

1. 

2. 

304 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1 

2 

3 

4 

5 

3. 

. 

. 

Minority 
Interest in 
all subsidiaries 
Associates 
(Investment  
as per the equity 
method) 
Indian 
1. 

2. 

3. 

. 

. 

Foreign 

1. 

2. 

3. 

. 

. 

Joint Ventures 
(as per proportionate 
consolidation/ 
investment 
as per the  
equity method) 
Indian 

1. 

2. 

3. 

. 

. 

Foreign 
1. 
2. 
3. 
. 
. 
Total 

________________________________  _______________________________ 

305 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3. All subsidiaries, associates and joint ventures (whether Indian or foreign) will be covered under consolidated 

financial statements. 

4. An entity shall disclose the list of subsidiaries or associates or joint ventures which have not been consolidated 

in the consolidated financial statements along with the reasons of not consolidating. 

1[Division II 

Financial Statements for a company whose financial statements are drawn up in compliance of the Companies 
(Indian Accounting Standards) Rules, 2015. 

GENERAL INSTURCTIONS FOR PREPARATION OF FINANCIAL STATEMENTS OF A COMPANY 
REQUIRED TO COMPLY WITH Ind AS 

1. Every company to which Indian Accounting Standards apply, shall prepare its financial statements in accordance 

with this Schedule or with such modification as may be required under certain circumstances. 

2. Where compliance with the requirements of the Act including Indian Accounting Standards (except the option 
of presenting assets and liabilities in the order of liquidity as provided by the relevant Ind AS) as applicable to the 
companies require any change in treatment or disclosure including addition, amendment, substitution or deletion in 
the head or sub-head or any changes inter se, in the financial or statements forming part thereof, the same shall be 
made and the requirements under this Schedule shall stand modified accordingly. 

3. The disclosure requirements specified in the Schedule are in addition to and not in substitution of the disclosure 
requirements specified in the Indian Accounting Standards. Additional disclosures specified in the Indian Accounting 
Standards shall be made in the Notes or by way of additional statement or statements unless required to be disclosed 
on the face of the Financial Statements. Similarly, all other disclosures as required by the Companies Act, 2013 shall 
be made in the Notes in addition to the requirements set out in this Schedule. 

4.  (i) Notes shall contain information in addition to that presented in the Financial Statements and shall provide 

where required- 

(a) narrative descriptions or disaggregations of items recognised in those statements; and 

(b) information about items that do not qualify for recognition in those statements. 

(ii) Each item on the face of the Balance Sheet, Statement of Changes in Equity and Statement of Profit and Loss 
shall be cross-referenced to any related information in the Notes. In preparing the Financial Statements including the 
Notes,  a  balance  shall  be  maintained  between  providing  excessive  detail  that  may  not  assist  users  of  Financial 
Statements and not providing important information as a result of too much aggregation. 

5.  Depending upon the 2[Total Income] of the company, the figures appearing in the Financial Statements shall 

be rounded off as below: 

2[Total Income] 

Rounding off 

(i)  less than one hundred crore rupees 

(ii) one hundred crore rupees or more 

To  the  nearest  hundreds,  thousands,  lakhs  or 
millions, or decimals thereof. 

To  the  nearest,  lakhs,  millions  or  crores,  or 
decimals thereof. 

Once a unit of measurement is used, it should be used uniformly in the Financial Statements. 

6. Financial Statements shall contain the corresponding amounts (comparatives) for the immediately preceding 
reporting period for all items shown in the Financial Statements including Notes except in the case of first Financial 
Statements laid before the company after incorporation. 

1. Ins. by Notification No. G.S.R. 404(E), dated 6th April, 2016 (w.e.f. 6-4-2016). 
2. Subs. by Notification No. G.S.R. 207(E), dated 24th March, 2021, for “Turnover” (w.e.f. 1-4-2021). 

306 

 
 
 
 
 
                                                           
7. Financial Statements shall disclose all ‘material’ items, i.e., the items if they could, individually or collectively, 
influence the economic decisions that users make on the basis of the financial statements. Materiality depends on the 
size or nature of the item or a combination of both, to be judged in the particular circumstances. 

8. For the purpose of this Schedule, the terms used herein shall have the same meanings assigned to them in Indian 

Accounting Standards. 

9. Where any Act or Regulation requires specific disclosures to be made in the standalone financial statements of 

a company, the said disclosures shall be made in addition to those required under this Schedule. 

Note: This Schedule sets out the minimum requirements for disclosure on the face of the Financial Statements, 
i.e., Balance Sheet, Statement of Changes in Equity for the period, the Statement of Profit and Loss for the period 
(The term ‘Statement of Profit and Loss’ has the same meaning as ‘Profit and Loss Account’) and Notes. Cash flow 
statement shall be prepared, where applicable, in accordance with the requirements of the relevant Indian Accounting 
Standard. 

Line items, sub-line items and sub-totals shall be presented as an addition or substitution on the face of the Financial 
Statements  when  such  presentation  is  relevant  to  an  understanding  of  the  company’s  financial  position  or 
performance or to cater to industry or sector-specific disclosure requirements or when required for compliance with 
the amendments to the Companies Act, 2013 or under the Indian Accounting Standards. 

PART I –BALANCE SHEET 

Name of the Company ......................  

Balance Sheet as at ............................  

Particulars 

Note No. 

(Rupees in ............... ) 

Figures as at the end of 
current  reporting  
period 

Figures as at the end of 
the  previous  reporting 
period 

2 

3 

4 

(1) 

(2) 

1 
ASSETS 
Non-current assets 
(a) Property, Plant and 
Equipment 

(b) Capital work-in-progress 

(c) Investment Property 

(d) Goodwill 

(e) Other Intangible assets 

Intangible  assets  under 

(f) 
development 

(g) Biological Assets other 
than bearer plants 

(h)  Financial Assets 

(i) Investments 

(ii) Trade receivables 

(iii) Loans 

(iv) Others (to be 

specified) 

(i) Deferred tax assets (net) 
(j) Other non-current assets 
Current assets 

(a) Inventories 

(b) Financial Assets 
(i)  Investments 
(ii)  Trade receivables 
(iii)   Cash and cash 
equivalents 
(iv)   Bank balances 
other than (iii) above 
(v)  Loans 
(vi) Others (to be 
specified) 

(c) Current Tax Assets (Net) 

(d) Other current assets 

307 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) 

(2) 

Total Assets 

1[Trade Payables 

(A)  total outstanding dues of micro 

enterprises and small enterprises; 
and 

(B)  total outstanding dues of creditors 

other than micro enterprises and 
small enterprises.] 

(a)  EQUITY and 

LIABILITIES  

Non-current liabilities 

(a) Financial Liabilities 

(i) 

Borrowings 

2[(ia)     Lease liabilities] 

1[Trade Payables 

(A)  total outstanding dues of 
micro enterprises and small 
enterprises; and 

(B)  total outstanding dues of 
creditors other than micro 
enterprises and small 
enterprises.] 

(iii) 

Other financial 
liabilities (other than 
those specified in item 
(b), to be specified) 

(b) Provisions 

(c) Deferred tax liabilities 

(Net) 

(d) Other non-current 

liabilities  

Current liabilities 

(a) Financial Liabilities 

(i)    Borrowings 
2[(ia)      Lease liabilities] 

(ii) 

Trade payables 

(iii)  Other financial 
liabilities (other than those 
specified in item (c) 

(b) Other current liabilities 

(c) Provisions 

(d) Current Tax Liabilities 
(Net) 

 Total Equity and Liabilities 
See accompanying notes to the financial statements 

3[STATEMENT OF CHANGES IN EQUITY 

Name of the Company ...............................  

A. Equity Share Capital 

(1) Current reporting period 

Balance at the 
beginning of the 
current reporting 
period 

Changes 
in  Equity 
Share  Capital  due  to 
prior period errors 

Restated balance at 
the beginning of the 
current reporting 
period 

Changes in equity 
share capital 
during the current 
year 

Balance at the end 
of the current 
reporting period 

1. Subs. by Notification No. G.S.R. 1022(E), dated 11-10-2018, for "(b) Trade payables" (w.e.f. 11-10-2018). 
2. Ins. by Notification No. G.S.R. 207(E), dated 24th March, 2021, (w.e.f. 1-4-2021). 
3. Subs. by Notification No. G.S.R. 207(E), dated 24th March, 2021, for “Statement of Changes in Equity” (w.e.f. 1-4-2021). 

308 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
(2) Previous reporting period 

Balance at the 
beginning of the 
previous reporting 
period 

Changes in Equity 
Share Capital due to 
prior period errors 

Restated balance at the 
beginning of the 
previous reporting 
period 

Changes in equity share 
capital during the 
previous year 

Balance at the end of 
the previous reporting 
period 

B. Other Equity 
(1) Current reporting period 

Reserves and Surplus 

Share 
applica- 
tion 
money 
pending 
allotment 

Equity 
component 
of compound 
financial 
instruments 

Capital 
Reserve 

1[Securities  
Premium  
Reserve] 

Debt instru- 
ments through 

Retained 
Earnings 

Other 
Comprehensive 

Income 

Other 
Reserv
es 
(specif
y 
nature) 

Effective 
portion of 
Cash Flow 
Hedges 

Equity Instru- 
ments 
through 
Other 
Comprehensive 
Income 

Revaluat
ion 
Surplus 

Exchange 
differences 
on trans- 
lating the 
financial 
state- 
ments of a 
foreign 
operation 

Other items 
of Other 
Compre- 
hensive 
Income 
(specify 
nature) 

Money 
received 
against 
share 
warrants 

Total 

Balance at the  
beginning of the  
current reporting 
period 

Changes in  
accounting  
policy or prior  
period errors 

Restated  
balance at  
the  
beginning  
of the current  
reporting  
period 

Total 

Comprehensive 
Income for the 
Current year 

Dividends 

Transfer to  
retained  
earnings 

Any other  
change (to be  
specified) 

Balance at the  
end of the  
current reporting 
period 

(2) Previous reporting period 

Share 
application 
money 
pending 
allotment 

Equity 
componen
t of 
compound 
financial  
instrument
s 

Capital 
Reserve 

Securities 
Premium 

Retained 
Earnings 

Other 
Reserves 
(specify 
nature) 

Balance at the  

Beginning of 
the previous 
reporting 
period 

Reserves and Surplus 

Debt 
instruments 
through 
Other 
Comprehen
sive Income 

Equity 
Instruments 
through 
Other 
Comprehen
sive Income 

Effective 
portion of 
Cash Flow 
Hedges 

Revaluation 
Surplus 

Total 

Money 
received 
against share 
warrants 

Other 
items of 
Other 
Compre
hensive 
Income 
(specify 
nature) 

Exchange 
difference
s on 
translating 
the 
financial 
statements 
of a 
foreign 
operation 

1. Subs. by Notification No. G.S.R. 1022(E), dated 11th October, 2018, for “Securities Premium Reserve” (w.e.f. 11-10-2018). 

309 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
Changes in 
accounting 
policy/prior 
period errors 
Restated 
balance at the 
beginning of 
the previous 
reporting 
period 

Total 
Comprehensiv
e Income for 
the previous 
year 

Dividends   

Transfer to 
retained 
earnings 

Any other 
change (to be 
specified) 

Balance at the 
end of the 
previous 
reporting 
period 

Note: Remeasurement of defined benefit plans and fair value changes relating to own credit risk of financial liabilities 
designated at fair value through profit or loss shall be recognized as a part of retained earnings with separate disclosure of 
such items alongwith the relevant amounts in the Notes or shall be shown as a separate column under Reserves and Surplus.] 

Notes: 

GENERAL INSTRUCTIONS FOR PREPARATION OF BALANCE SHEET 

1. 

An entity shall classify an asset as current when- 

(a)  it expects to realise the asset, or intends to sell or consume it, in its normal operating cycle; 

(b)  it holds the asset primarily for the purpose of trading; 

(c)  it expects to realise the asset within twelve months after the reporting period; or 

(d)  the asset is cash or a cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least 

twelve months after the reporting period. 

An entity shall classify all other assets as non-current. 

The operating cycle of an entity is the time between the acquisition of assets for processing and their realisation in cash or cash 

2. 
equivalents. When the entity’s normal operating cycle is not clearly identifiable, it is assumed to be twelve months. 

3. 

An entity shall classify a liability as current when- 

(a) 

it expects to settle the liability in its normal operating cycle; 

(b) 

it holds the liability primarily for the purpose of trading; 

(c) 

the liability is due to be settled within twelve months after the reporting period; or 

(d) 

it does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. 
Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do 
not affect its classification. 

An entity shall classify all other liabilities as non-current. 

4. 
rendered in the normal course of business. 

A receivable shall be classified as a ‘trade receivable’ if it is in respect of the amount due on account of goods sold or services 

5. 
received in the normal course of business. 

A payable shall be classified as a ‘trade payable’ if it is in respect of the amount due on account of goods purchased or services 

6. 

A company shall disclose the following in the Notes: 

310 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
A. 

Non-Current Assets 

I. Property, Plant and Equipment : 

(i) Classification shall be given as: 

(a) 

Land 

(b) 

Buildings 

(c) 

Plant and Equipment 

(d) 

Furniture and Fixtures 

(e) 

(f) 

Vehicles 

Office equipment 

(g) 

Bearer Plants 

(h) 

Others (specify nature) 

(ii) Assets under lease shall be separately specified under each class of assets. 
1[(iii) A reconciliation of the gross and net carrying amounts of each class of assets at the beginning and end of the reporting 
period  showing  additions,  disposals,  acquisitions  through  business  combinations,  amount  of  change  due  to  revaluation  (if 
change is 10% or more in the aggregate of the net carrying value of each class of Property, Plant and Equipment) and other 
adjustments and the related depreciation and impairment losses or reversals shall be disclosed separately.] 

II. Investment Property: 

A reconciliation of the gross and net carrying amounts of each class of property at the beginning and end of the reporting period 
showing additions, disposals, acquisitions through business combinations and other adjustments and the related depreciation and 
impairment losses or reversals shall be disclosed separately. 

III  Goodwill: 

A reconciliation of the gross and net carrying amount of goodwill at the beginning and end of the reporting period showing 

additions, impairments, disposals and other adjustments. 

IV. Other Intangible assets: 

(i) 

Classification shall be given as: 

(a)  Brands or trademarks 

(b)  Computer software 

(c)  Mastheads and publishing titles 

(d)  Mining rights 

(e)  Copyrights, patents, other intellectual property rights, services and operating rights 

(f)  Recipes, formulae, models, designs and prototypes 

(g)  Licenses and franchises 

(h)  Others (specify nature) 

2[(ii) 
A reconciliation of the gross and net carrying amounts of each class of assets at the beginning and end of the reporting period 
showing additions, disposals, acquisitions through business combinations, amount of change due to revaluation (if change is 10% or 
more in the aggregate of the net carrying value of each class of intangible assets) and other adjustments and the related amortization 
and impairment losses or reversals shall be disclosed separately.] 

V.  Biological Assets other than bearer plants: 

A reconciliation of the carrying amounts of each class of assets at the beginning and end of the reporting period showing additions, 
disposals, acquisitions through business combinations and other adjustments shall be disclosed separately. 

1. Subs. by Notification No. G.S.R. 207(E), dated 24th March, 2021, for item (iii) (w.e.f. 1-4-2021). 
2. Subs. by Notification No. G.S.R. 207(E), dated 24th March, 2021, for item (ii) (w.e.f. 1-4-2021). 

311 

 
                                                           
VI.  Investments: 

(i) 

Investments shall be classified as: 

(a) 

Investments in Equity Instruments; 

(b) 

Investments in Preference Shares; 

(c) 

Investments in Government or trust securities; 

(d) 

Investments in debentures or bonds; 

(e) 

Investments in Mutual Funds; 

(f) 

Investments in partnership firms; or 

(g)  Other investments (specify nature). 

Under each classification, details shall be given of names of the bodies corporate that are- 

(i) subsidiaries, 

(ii)  associates, 

(iii) joint ventures, or 

(iv) structured entities, 

in whom investments have been made and the nature and extent of the investment so made in each such body corporate (showing 
separately investments which are partly-paid). Investments in partnership firms along alongwith names of the firms, their partners, 
total capital and the shares of each partner shall be disclosed separately. 

The following shall also be disclosed: 

(a)  Aggregate amount of quoted investments and market value thereof; 

(b) Aggregate amount of unquoted investments; and 

(c)  Aggregate amount of impairment in value of investments. 

VII. Trade Receivables: 

1[(i) 

Trade receivables shall be sub-classified as: 

(a) 

(b) 

(c) 

(d) 

Trade Receivables considered good – Secured; 

Trade Receivables considered good – Unsecured; 

Trade Receivables which have significant increase in Credit Risk; and  

Trade Receivables - credit impaired.] 

(ii)  Allowance for bad and doubtful debts shall be disclosed under the relevant heads separately. 

(iii)  Debts due by directors or other officers of the company or any of them either severally or jointly with any other person or debts 
due by firms or private companies respectively in which any director is a partner or a director or a member should be separately 
stated. 

2[(iv) Trade Receivables ageing schedule 

(Amount in Rs.) 

Particulars 

Outstanding for following periods from due date of payment# 

Less  than  6 
months 

6  months 
year 

-1 

1-2 years 

2-3 years 

More  than  3 
years 

Total 

(i) Undisputed Trade 

Receivables 
considered good 

- 

(ii) Undisputed Trade 
Receivables-  which 
have 
significant 
increase in credit risk 

1. Subs. by Notification No. G.S.R. 1022(E), dated 11th October, 2018, for “VII. Trade Receivable” (w.e.f. 11-10-2018). 
2. Ins. by Notification No. G.S.R. 207(E), dated 24th March, 2021, (w.e.f. 1-4-2021). 

312 

 
 
 
 
 
 
 
 
 
 
                                                           
(iii) 
Undisputed 
Trade  Receivables- 
credit impaired 

(iv)  Disputed  Trade 
Receivables-
considered good 

(v)  Disputed  Trade 
Receivables  –  which 
have 
significant 
increase in credit risk 

(vi)  Disputed  Trade 
Receivables- 
credit 
impaired 

#similar information shall be given where no due date of payment is specified in that case disclosure shall be from the date of the 
transaction. 

Unbilled dues shall be disclosed separately;] 

VIII. Loans: 

(i) 

Loans shall be classified as- 

1*** 

(b) Loans to related parties (giving details thereof); and 

(c) Other loans (specify nature). 

2[(ii) 

Loans Receivables shall be sub-classified as: 

(a) 

Loans Receivables considered good – Secured; 

(b) 

(c) 

(d) 

Loans Receivables considered good - Unsecured; 

Loans Receivables which have significant increase in Credit Risk; and 

Trade Receivables - credit impaired.] 

(iii) 

Allowance for bad and doubtful loans shall be disclosed under the relevant heads separately. 

Loans due by directors or other officers of the company or any of them either severally or jointly with any other persons or 

(iv) 
amounts due by firms or private companies respectively in which any director is a partner or a director or a member should be 
separately stated. 

3[IX. Other financial assets 

(i) Security Deposits 

(ii) Bank deposits with more than 12 months maturity 

(iii) others (to be specified)] 

IX. 

(i) 

(ii) 

(1) 

Other non-current assets: Other non-current assets shall be classified as- 

Capital Advances; and 

Advances other than capital advances; 

Advances other than capital advances shall be classified as: 

(a) 

(b) 

(c) 

Security Deposits; 

Advances to related parties (giving details thereof); and 

Other advances (specify nature). 

(2) 
Advances to directors or other officers of the company or any of them either severally or jointly with any other persons or 
advances to firms or private companies respectively in which any director is a partner or a director or a member should be separately 
stated. In case advances are of the nature of a financial asset as per relevant Ind AS, these are to be disclosed under ‘other financial 
assets’ separately. 

1. Sub-item (a) omitted by Notification No. G.S.R. 207(E), dated 24th March, 2021, (w.e.f. 1-4-2021). 
2. Subs. by Notification No. G.S.R. 1022(E), dated 11th October, 2018, for “VIII. Trade Receivable” (w.e.f. 11-10-2018). 
3. Subs. by Notification No. G.S.R. 207(E), dated 24th March, 2021, for sub-heading “IX” and the entries relating thereto (w.e.f. 1-4-2021). 
313 

 
                                                           
(iii) 

Others (specify nature). 

B. 

Current Assets 

I. 

(i) 

Inventories: 

Inventories shall be classified as- 

(a)  Raw materials; 
(b)  Work-in-progress; 
(c)  Finished goods; 
(d)  Stock-in-trade (in respect of goods acquired for trading); 
(e) Stores and spares; 

(f)  Loose tools; and 
(g)  Others (specify nature). 

(ii) 

Goods-in-transit shall be disclosed under the relevant sub-head of inventories. 

(iii) 

Mode of valuation shall be stated. 

II. 

(i) 

Investments: 

Investments shall be classified as- 

(a)  Investments in Equity Instruments; 
(b) Investment in Preference Shares; 
(c)  Investments in government or trust securities; 
(d) Investments in debentures or bonds; 
(e)  Investments in Mutual Funds; 
(f)  Investments in partnership firms; and 
(g) Other investments (specify nature). 

Under each classification, details shall be given of names of the bodies corporate that are- 

(i)  subsidiaries, 

(ii)  associates, 

(iii)  joint ventures, or 

(iv)  structured entities, 

in whom investments have been made and the nature and extent of the investment so made in each such body corporate (showing 
separately investments which are partly-paid). 

(ii) 

The following shall also be disclosed- 

(a) 
(b) 
(c) 

Aggregate amount of quoted investments and market value thereof; 

Aggregate amount of unquoted investments; 

Aggregate amount of impairment in value of investments. 

III. 

Trade Receivables: 

1[(i)  Trade receivables shall be sub-classified as: 

(a) 

(b) 

(c) 

(d) 

Loans Receivables considered good – Secured; 

Loans Receivables considered good - Unsecured; 

Loans Receivables which have significant increase in Credit Risk; and 

Trade Receivables - credit impaired.] 

(ii) 

Allowance for bad and doubtful debts shall be disclosed under the  relevant heads separately. 

(iii) 
Debts due by directors or other officers of the company or any of them either severally or jointly with any other person or 
debts due by firms or private companies respectively in which any director is a partner or a director or a member should be separately 
stated. 

1. Subs. by Notification No. G.S.R. 1022(E), dated 11th October, 2018, for “III Trade Receivables” (w.e.f. 11-10-2018). 

314 

 
                                                           
1[(iv) For trade receivable outstanding, following ageing schedule shall be given: 

Trade Receivables ageing schedule 

Particulars 

Outstanding for following periods from due date of payment# 

Less than 6 months 

6  months  -
1 year 

1-2 
years 

2-3 
years 

More  than 
3 years 

Total 

(Amount in Rs.) 

(i) Undisputed Trade 

receivables- considered good 

(ii) Undisputed Trade Receivables 
-which  have  significant  increase 
in credit risk 

(iii) 
Receivables-credit impaired 

Undisputed 

Trade 

(iv)  Disputed  Trade  Receivables-
considered good 

(v)  Disputed  Trade  Receivables-
which have significant increase in 
credit risk 

(iv) Disputed Trade Receivables -
credit impaired 

        # similar information shall be given where no due date of payment is specified in that case disclosure shall be from the date of 
the transaction. 

Unbilled dues shall be disclosed separately.] 

IV. 

Cash and cash equivalents: Cash and cash equivalents shall be classified as- 

a.  Balances with Banks (of the nature of cash and cash equivalents); 

b.  Cheques, drafts on hand; 

c.  Cash on hand; and 

d.  Others (specify nature). 

Loans: 

Loans shall be classified as: 

V. 

(i) 

(a) 

2*** 

(b)  Loans to related parties (giving details thereof); and 

(c)  Others (specify nature). 

3[(ii)  Trade receivables shall be sub-classified as: 

(a) 
(b) 

(c) 

(d) 

Loans Receivables considered good – Secured; 

Loans Receivables considered good - Unsecured; 

Loans Receivables which have significant increase in Credit Risk; and 

Trade Receivables - credit impaired.] 

(iii) 

  Allowance for bad and doubtful loans shall be disclosed under the relevant heads separately. 

(iv) 
Loans due by directors or other officers of the company or any of them either severally or jointly with any other person or 
amounts due by firms or private companies respectively in which any director is a partner or a director or a member shall be separately 
stated. 

1. Ins. by Notification No. G.S.R. 207(E), dated 24th March, 2021, (w.e.f. 1-4-2021). 
2. Sub-item (a) omitted by Notification No. G.S.R. 207(E), dated 24th March, 2021, (w.e.f. 1-4-2021). 
3. Subs. by ibid., for “V. Loans” (w.e.f. 11-10-2018). 

315 

 
 
 
 
 
 
 
 
                                                           
 
1[VA.  Other  Financial  Assets:  This  is  an  all-inclusive  heading,  which  incorporates  financial  assets  that  do  not  fit  into  any  other 
financial asset categories, such as, Security Deposits.] 

VI.  Other current assets (specify nature): This is an all-inclusive heading, which incorporates current assets that do not fit into any 

other asset categories. Other current assets shall be classified as- 

(i) Advances other than capital advances 

(1) Advances other than capital advances shall be classified as: 

(a) 

(b) 

(c) 

 Security Deposits; 

Advances to related parties (giving details thereof); 

Other advances (specify nature). 

(2)  Advances to directors or other officers of the company or any of them either severally or jointly with any other persons or 
advances to firms or private companies respectively in which any director is a partner or a director or a member should be separately 
stated. 

(ii) 

Others (specify nature) 

C. 

Cash and Bank balances: The following disclosures with regard to cash and bank balances shall be made: 

(a)  Earmarked balances with banks (for example, for unpaid dividend) shall be separately stated. 

(b)  Balances with banks to the extent held as margin money or security against the borrowings, guarantees, other commitments 
shall be disclosed separately. 

(c)  Repatriation restrictions, if any, in respect of cash and bank balances shall be separately stated. 

D. 

Equity 

I. 

Equity Share Capital: For each class of equity share capital: 

(a)  the number and amount of shares authorised; 

(b)  the number of shares issued, subscribed and fully paid, and subscribed but not fully paid; 

(c)  par value per share; 

(d)  a reconciliation of the number of shares outstanding at the beginning and at the end of the period; 

(e)  the rights, preferences and restrictions attaching to each class of shares including restrictions on the distribution of dividends and 
the repayment of capital; 

(f)  shares in respect of each class in the company held by its holding company or its ultimate holding company including shares held 
by subsidiaries or associates of the holding company or the ultimate holding company in aggregate; 

(g)  shares in the company held by each shareholder holding more than five per cent. shares specifying the number of shares held; 

(h)  shares reserved for issue under options and contracts or commitments for the sale of shares or disinvestment, including the terms 
and amounts; 

(i) 

for the period of five years immediately preceding the date at which the Balance Sheet is prepared- 

• 

• 

• 

(j) 

(k) 

(l) 

aggregate number and class of shares allotted as fully paid up pursuant to contract without payment being received in cash; 

aggregate number and class of shares allotted as fully paid up by way of bonus shares; and 

aggregate number and class of shares bought back; 

terms of any securities convertible into equity shares issued along with the earliest date of conversion in descending order 
starting from the farthest such date; 

calls unpaid (showing aggregate value of calls unpaid by directors and officers); 

forfeited shares (amount originally paid up). 

2[(m) A company shall disclose Shareholding of Promoters* as under: 

Shares held by promoters at the end of the year 

% Change during the year*** 

S.No 

Total 

Promoter name  No. of Shares*** 

%of total shares 

*Promoter hare means promoter as defined in the Companies Act, 2013. 

1. Ins. by Notification No. G.S.R. 207(E), dated 24th March, 2021, (w.e.f. 1-4-2021). 
2. Ins. by Notification No. G.S.R. 207(E), dated 24th March, 2021, (w.e.f. 1-4-2021). 

316 

 
 
 
 
 
 
                                                           
** Details shall be given separately for each class of shares 

*** percentage change shall be computed with respect to the number at the beginning of the year or if issued during the year for the 
first time then with respect to the date of issue.] 

II. 

Other Equity: 

(i) 

‘Other Reserves’ shall be classified in the notes as- 

(a) 
(b) 

(c) 

(d) 

Capital Redemption Reserve; 
Debenture Redemption Reserve; 

Share Options Outstanding Account; and 

Others– (specify the nature and purpose of each reserve and the amount in respect  thereof); (Additions and deductions 

since last balance sheet to be shown under each of the specified heads) 

(ii) 

Retained Earnings represents surplus i.e. balance of the relevant column in the Statement of Changes in Equity; 

(iii) 

A reserve specifically represented by earmarked investments shall disclose the fact that it is so represented; 

(iv) 
Debit  balance  of  Statement  of  Profit  and  Loss  shall  be  shown  as  a  negative  figure  under  the  head  ‘retained  earnings’. 
Similarly, the balance of ‘Other Equity’, after adjusting negative balance of retained earnings, if any, shall be shown under the head 
‘Other Equity’ even if the resulting figure is in the negative; and 

(v) 
E. 

I. 

(i) 

Under the sub-head ‘Other Equity’, disclosure shall be made for the nature and amount of each item. 
Non-Current Liabilities 

Borrowings: 

borrowings shall be classified as- 

(a) Bonds or debentures 

(b) Term loans 

(I) 

from banks 

(II)  from other parties 

(c) Deferred payment liabilities 

(d) Deposits 

(e) Loans from related parties 

1*** 

(g) Liability component of compound financial instruments 

(h) Other loans (specify nature); 

(ii) 
case. 

borrowings shall further be sub-classified as secured and unsecured. Nature of security shall be specified separately in each 

(iii) 
disclosed; 

where  loans  have  been  guaranteed  by  directors  or  others,  the  aggregate  amount  of  such  loans  under  each  head  shall  be 

(iv) 
bonds or debentures (along with the rate of interest, and particulars of redemption or conversion, as the case may be) shall 
be stated in descending order of maturity or conversion, starting from farthest redemption or conversion date, as the case may be. 
Where bonds/debentures are redeemable by installments, the date of maturity for this purpose must be reckoned as the date on which 
the first installment becomes due; 

(v) particulars of any redeemed bonds or debentures which the company has power to reissue shall be disclosed; 

(vi) terms of repayment of term loans and other loans shall be stated; and 

(vii) 
separately in each case. 

period  and  amount  of  default  as  on  the  balance  sheet  date  in  repayment  of  borrowings  and  interest  shall  be  specified 

1. Sub-item (f) omitted by Notification No. G.S.R. 207(E), dated 24th March, 2021, (w.e.f. 1-4-2021). 

317 

 
                                                           
II. 

Provisions: The amounts shall be classified as- 

(a)  Provision for employee benefits; and 

(b)  Others (specify nature). 

III. 

Other non-current liabilities; 

(a)  Advances; and 
(b)   Others (specified nature). 

F. 

I. 

Current Liabilities 

Borrowings: 

(i) 

Borrowings shall be classified as- 

(a) Loans repayable on demand 

(I) 

from banks 

(II)  from other parties 

(b) Loans from related parties 

(c) Deposits 

(d) Other loans (specify nature); 

(ii) 
case; 

borrowings shall further be sub-classified as secured and unsecured. Nature of security shall be specified separately in each 

(iii) 
disclosed; 

where  loans  have  been  guaranteed  by  directors  or  others,  the  aggregate  amount  of  such  loans  under  each  head  shall  be 

(iv)        period and amount of default as on the balance sheet date in repayment of borrowings and interest, shall be specified 
separately in each case. 

1[(v) Current maturities of Long term borrowing shall be disclosed separately.] 

II. 

Other Financial Liabilities: Other Financial liabilities shall be classified as- 

2*** 

(c) Interest accrued; 

(d) Unpaid dividends; 

(e) Application money received for allotment of securities to the extent refundable and interest accrued thereon; 

(f) Unpaid matured deposits and interest accrued thereon; 

(g) Unpaid matured debentures and interest accrued thereon; and 

(h) Others (specify nature). 

‘Long term debt’ is a borrowing having a period of more than twelve months at the time of origination 

III. 

Other current liabilities: 

The amounts shall be classified as- 

(a) 

revenue received in advance; 

(b)  other advances (specify nature); and 

(c)  others (specify nature); 

1. Ins. by Notification No. G.S.R. 207(E), dated 24th March, 2021, (w.e.f. 1-4-2021). 
2. Items (a) and (b) omitted by Notification No. G.S.R. 207(E), dated 24th March, 2021, (w.e.f. 1-4-2021). 

318 

 
 
                                                           
IV. 

Provisions: The amounts shall be classified as- 

(i) 

(ii) 

provision for employee benefits; and 

others (specify nature). 

1[FA.    Trade Payables 

The following details relating to Micro, Small and Medium Enterprises shall be disclosed in the notes:- 

(a)  the principal amount and the interest due thereon (to be shown separately) remaining unpaid to any supplier at the end of each 

accounting year; 

(b)  the amount of interest paid by the buyer in terms of section 16 of the Micro, Small and Medium Enterprises Development Act, 
2006 (27 of 2006), along with the amount of the payment made to the supplier beyond the appointed day during each accounting 
year; 

(c)  the amount of interest due and payable for the period of delay in making payment (which have been paid but beyond the appointed 
day during the year) but without adding the interest specified under the Micro, Small and Medium Enterprises Development Act, 
2006; 

(d)  the amount of interest accrued and remaining unpaid at the end of each accounting year; and 

(e)  the amount of further interest remaining due and payable even in the succeeding years, until such date when the interest dues 
above are actually paid to the small enterprise, for the purpose of disallowance of a deductible expenditure under section 23 of 
the Micro, Small and Medium Enterprises Development Act, 2006. 

Explanation.-The  terms  'appointed  day',  'buyer','  enterprise',  'micro  enterprise',  'small  enterprise'  and  'supplier',  shall  have  the  same 
meaning assigned to those under clauses (b), (d), (e), (h), (m) and (n) respectively of section 2 of the Micro, Small and Medium Enterprises 
Development Act, 2006.] 

2[FB. For trade payables due for payment, following ageing schedule shall be given: 

Trade payable aging schedule 

Particulars 

Outstanding for following periods from due date of payment# 

Less than 1 year 

1-2 years 

2-3 years 

than  3 

Total 

More 
years 

(Amount in Rs.) 

(i) MSME 

(ii) Others 

(iii) Disputed dues- MSME 

(iv) Disputed dues- Others 

#similar information shall be given where no due date of payment is specified in that case disclosure shall be from the date  of the 

transaction. 

Unbilled dues shall be disclosed separately] 

G. 

The presentation of liabilities associated with group of assets classified as held for sale and non-current assets classified as 

held for sale shall be in accordance with the relevant Indian Accounting Standards (Ind ASs). 
H. 
(to the extent not provided for) 

Contingent Liabilities and Commitments:  

(i) 

Contingent Liabilities shall be classified as- 

(a)  claims against the company not acknowledged as debt; 

(b)  guarantees excluding financial guarantees; and 

(c)  other money for which the company is contingently liable. 

1. Ins. by Notification No. G.S.R. 1022(E), dated 11th October, 2018 (w.e.f. 11-10-2018). 
2. Ins. by Notification No. G.S.R. 207(E), dated 24th March, 2021, (w.e.f. 1-4-2021). 

319 

 
 
 
 
 
 
 
 
                                                           
 
(ii) Commitments shall be classified as- 

(a)  estimated amount of contracts remaining to be executed on capital account and not provided for; 

(b)  uncalled liability on shares and other investments partly paid; and 

(c)  other commitments (specify nature). 

I. 
The amount of dividends proposed to be distributed to equity and preference shareholders for the period and the related 
amount per share shall be disclosed separately. Arrears of fixed cumulative dividends on irredeemable preference shares shall 
also be disclosed separately. 

J. 
Where in respect of an issue of securities made for a specific purpose the whole or part of amount has not been used 
for the specific purpose at the Balance Sheet date, there shall be indicated by way of note how such unutilised amounts have 
been used or invested. 

1[JA. Where the company has not used the borrowings from banks and financial institutions for the specific purpose for which 
it was taken at the balance sheet date, the company shall disclose the details of where they have been used.] 

   2* 

* 

* 

* 

* 

  3[L. Additional Regulatory Information 

(i) Title deeds of Immovable Properties not held in name of the Company 

The company shall provide the details of all the immovable properties (other than properties where the Company is the lessee 
and the lease agreements are duly executed in favour of the lessee) whose title deeds are not held in the name of the company in 
following format and where such immovable property is jointly held with others, details are required to be given to the extent 
of the company’s share. 

Relevant line item 
the  Balance 
in 
sheet 

Description 
of  item  of 
property 

Gross 
carrying 
value 

Title 
deeds 
held 
in 
the  name 
of 

Whether title deed 
holder is a promoter, 
director or relative# 
of promoter*/director 
or employee of 
promoter/director 

Property 
held 
since 
which 
date 

Reason for not being 
held  in  the  name  of 
the company** 

PPE 

- 

Investment 
property 

Land 

- 

- 

- 

- 

**also  indicate  if  in 
dispute 

 Building 

Land 

- 

Building 

Non-current  asset 
held for sale 

Land 

Building 

- 

others 

#Relative here means relative as defined in the Companies Act, 2013. 

1. Ins. by Notification No. G.S.R. 207(E), dated 24th March, 2021, (w.e.f. 1-4-2021). 
2. Heading K and the entries relating thereto omitted by Notification No. G.S.R. 207(E), dated 24th March, 2021, (w.e.f. 1-4-2021). 
3. Ins. by Notification No. G.S.R. 207(E), dated 24th March, 2021, (w.e.f. 1-4-2021). 

320 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
*Promoter here means promoter as defined in the Companies Act, 2013. 

(ii) The Company shall disclose as to whether the fair value of investment property (as measured for disclosure purposes in the 
financial statements) is based on the valuation by a registered valuer as defined under rule 2 of Companies (Registered Valuers 
and Valuation) Rules, 2017. 

(iii) Where the Company has revalued its Property, Plant and Equipment (including Right-of-Use Assets), the company shall 
disclose as to whether the revaluation is based on the valuation by a registered valuer as defined under rule 2 of Companies 
(Registered Valuers and Valuation) Rules, 2017. 

(iv)Where the company has revalued its intangible assets, the company shall disclose as to whether the revaluation is based on 
the valuation by a registered valuer as defined under rule 2 of Companies (Registered Valuers and Valuation) Rules, 2017. 

(v) The following disclosures shall be made where Loans or Advances in the nature of loans are granted to promoters, director, 
KMPs and the related parties (as defined under Companies Act, 2013), either severally or jointly with any other person, that are: 

(a) repayable on demand; or 

(b) without specifying any terms or period of repayment, 

Type of Borrower  Amount of loan or advance in the nature 
of loan outstanding 

Percentage  to  the  total  Loans  and 
Advances in the nature of loans 

Promoter 

Directors 

KMPs 

Related Parties 

(vi) Capital-Work-in Progress (CWIP) 

(a) For Capital-work-in progress, following ageing schedule shall be given: 

CWIP aging schedule 

CWIP 

Amount in CWIP for a period of 

Total* 

Less than 1 year 

1-2 years 

2-3 years 

More than 3 years 

(Amount in Rs.) 

Projects 
progress 

in 

Projects 
temporarily 
suspended 

*Total shall tally with CWIP amount in the balance sheet. 

(b) For capital-work in progress, whose completion is overdue or has exceeded its cost compared to its original plan, following 
CWIP completion schedule shall be given**: 

                                                                                                                                        (Amount in Rs.) 

To be completed in 

Less than 1 year 

1-2 years 

2-3 years 

More than 3 years 

CWIP 

Project 1 

321 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Project 2” 

** Details of projects where activity has been suspended shall be given separately. 

(vii) Intangible assets under development: 

(a) For Intangible assets under development, following ageing schedule shall be given: 

Intangible assets under development aging schedule 

                                                                                                                                                            (Amount in Rs.) 

Amount in CWIP for a period of 

Total* 

Less than 1 year 

1-2 year 

2-3 years 

More than 3 years 

Intangible  assets 
under 
development 

Projects 
progress 

in 

Projects 
temporarily 
suspended 

*Total shall tally with the amount of Intangible assets under development in the balance sheet. 

(b) For Intangible assets under development, whose completion is overdue or has exceeded its cost compared to its original plan, 
the following Intangible assets under development completion schedule shall be given**: 

                                                                                                                                        (Amount in Rs.) 

To be completed in 

Less than 1 year 

1-2 years 

2-3 years 

More than 3 years 

Intangible 
assets  under 
development 

Project 1 

Project 2” 

** Details of projects where activity has been suspended shall be given separately. 

(viii) Details of Benami Property held 

Where any proceeding has been initiated or pending against the company for holding any benami property under the Benami 
Transactions (Prohibition) Act, 1988 (45 of 1988) and rules made thereunder, the company shall disclose the following:- 

(a) Details of such property, 

(b) Amount thereof, 

(c) Details of Beneficiaries, 

(d) If property is in the books, then reference to the item in the Balance Sheet, 

(e) If property is not in the books, then the fact shall be stated with reasons, 

(f) Where there are proceedings against the company under this law as an abetter of the transaction or as the transferor then 

the details shall be provided, 

(g) Nature of proceedings, status of same and company‘s view on same. 

(ix) where the Company has borrowings from banks or financial institutions on the basis of security of current assets, it shall 
disclose the following:- 

322 

 
 
 
 
 
 
 
 
 
 
 
 
(a) whether quarterly returns or statements of current assets filed by the Company with banks or financial institutions are in 

agreement with the books of accounts; 

(b) if not, summary of reconciliation and reasons of material discrepancies, if any to be adequately disclosed. 

(x) Wilful Defaulter* 

Where a company is a declared wilful defaulter by any bank or financial Institution or other lender, following details shall 
be given: 

(a) Date of declaration as willful defaulter, 

(b) Details of defaults (amount and nature of defaults) 

*  wilful  defaulter‖  here  means  a  person  or  an  issuer  who  or  which  is  categorized  as  a  willful  defaulter  by  any  bank  or       
financial institution (as defined under the Companies Act, 2013) or consortium thereof, in accordance with the guidelines on 
wilful defaulters issued by the Reserve Bank of India. 

(xi) Relationship with Struck off Companies 

Where the company has any transactions with companies struck off under section 248 of the Companies Act, 2013 or section 
560 of Companies Act, 1956, the Company shall disclose the following details, namely:- 

Name of struck off 
Company 

Nature of transactions with struck-
off Company 

Balance outstanding  Relationship with the Struck off 
company, if any, to be disclosed 

Investment in securities 

Receivables 

Payables 

Shares held by stuck off company 

Other outstanding balances (to be 
specified) 

(xii) Registration of charges or satisfaction with Registrar of Companies (ROC) 

Where any charges or satisfaction yet to be registered with ROC beyond the statutory period, details and reasons thereof shall 
be disclosed. 

(xiii) Compliance with number of layers of companies 

Where the company has not complied with the number of layers prescribed under clause (87) of section 2 of the Act read with 
the Companies (Restriction on number of Layers) Rules, 2017, the name and CIN of the companies beyond the specified layers 
and the relationship or extent of holding of the company in such downstream companies shall be disclosed. 

(xiv) Following Ratios to be disclosed:- 

(a) Current Ratio, 

(b) Debt-Equity Ratio, 

(c) Debt Service Coverage Ratio, 

(d) Return on Equity Ratio, 

(e) Inventory turnover ratio, 

(f) Trade Receivables turnover ratio, 

(g) Trade payables turnover ratio, 

(h) Net capital turnover ratio, 

(i) Net profit ratio, 

323 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(j) Return on Capital employed, 

(k) Return on investment. 

The  company  shall  explain  the  items  included  in  numerator  and  denominator  for  computing  the  above  ratios.  Further 
explanation shall be provided for any change in the ratio by more than 25% as compared to the preceding year. 

(xv) Compliance with approved Scheme(s) of Arrangements 

Where the Scheme of Arrangements has been approved by the Competent Authority in terms of sections 230 to 237 of the 
Companies Act, 2013, the company shall disclose that the effect of such Scheme of Arrangements have been accounted for in 
the books of account of the Company ‘in accordance with the Scheme’ and ‘in accordance with accounting standards’ and any 
deviation in this regard shall be explained. 

(xvi) Utilisation of Borrowed funds and share premium: 

(A) Where company has advanced or loaned or invested funds (either borrowed funds or share premium or any other sources 
or  kind  of  funds)  to  any  other  person(s) or  entity(ies),  including  foreign  entities  (Intermediaries)  with  the  understanding 
(whether recorded in writing or otherwise) that the Intermediary shall 

(i) 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 

(ii) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries; 

the company shall disclose the following:- 

(I) date and amount of fund advanced or loaned or invested in Intermediaries with complete details of each Intermediary. 

(II) date and amount of fund further advanced or loaned or invested by such Intermediaries to other intermediaries or Ultimate 
Beneficiaries alongwith complete details of the ultimate beneficiaries. 

(III) date and amount of guarantee, security or the like provided to or on behalf of the Ultimate Beneficiaries 

(IV) declaration that relevant provisions of the Foreign Exchange Management Act, 1999 (42 of 1999) and Companies Act 
has been complied with for such transactions and the transactions are not violative of the Prevention of Money-Laundering 
act, 2002 (15 of 2003).; 

(B) Where a company has received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) 
with the understanding (whether recorded in writing or otherwise) that the company shall 

(i) 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 

(ii)  provide  any  guarantee,  security  or  the  like  on  behalf  of  the  Ultimate  Beneficiaries,  the  company  shall  disclose  the 
following:- 

(I) date and amount of fund received from Funding parties with complete details of each Funding party. 

(II) date and amount of fund further advanced or loaned or invested other intermediaries or Ultimate Beneficiaries alongwith 
complete details of the other intermediaries‘ or ultimate beneficiaries. 

(III) date and amount of guarantee, security or the like provided to or on behalf of the Ultimate Beneficiaries 

(IV) declaration that relevant provisions of the Foreign Exchange Management Act, 1999 (42 of 1999) and Companies Act 
has been complied with for such transactions and the transactions are not violative of the Prevention of Money-Laundering 
act, 2002 (15 of 2003). 

7. 
When a company applies an accounting policy retrospectively or makes a restatement of items in the financial statements or 
when  it  reclassifies  items  in  its  financial  statements,  the  company  shall  attach  to  the  Balance  Sheet,  a  “Balance  Sheet”  as  at  the 
beginning of the earliest comparative period presented. 

8. 
Share application money pending allotment shall be classified into equity or liability in accordance with relevant Indian Accounting 
Standards. Share application money to the extent not refundable shall be shown under the head Equity and share application money to 
the extent refundable shall be separately shown under ‘Other financial liabilities’. 

9. 
Preference shares including premium received on issue, shall be classified and presented as ‘Equity’ or ‘Liability’ in accordance 
with the requirements of the relevant Indian Accounting Standards. Accordingly, the disclosure and presentation requirements in this 
regard applicable to the relevant class of equity or liability shall be applicable mutatis mutandis to the preference shares. For instance,  
324 

 
1[plain vanilla], redeemable preference shares shall be classified and presented under ‘non-current liabilities’ as ‘borrowings’ and the 
disclosure requirements in this regard applicable to such borrowings shall be applicable mutatis mutandis to redeemable preference 
shares. 

10.  Compound financial instruments such as convertible debentures, where split into equity and liability components, as per the 
requirements of the relevant Indian Accounting Standards, shall be classified and presented under the relevant heads in ‘Equity’ and 
‘Liabilities’ 

11. 
Accounting Standards. 

Regulatory  Deferral  Account  Balances  shall  be  presented  in  the  Balance  Sheet  in  accordance  with  the  relevant  Indian 

PART II – STATEMENT OF PROFIT AND LOSS 

Name of the Company ...........................  

Statement of Profit and Loss for the period ended ...............................  

Particulars 

Note No. 

Figures for 
the current 
reporting 
period 

(Rupees in ............... ) 

Figures for 
the 
previous 
reporting 
period 

I 

II 

III 

IV 

V 

VI 

VII 

Revenue From Operations 

Other Income 

Total Income (I+II)   

EXPENSES 

Cost of materials consumed 

Purchases of Stock-in-Trade 

Changes in inventories of finished goods, 
Stock-in -Trade and work-in-progress 

Employee benefits expense 

Finance costs 

Depreciation and amortization expense 

Other expenses 

Total expenses (IV)   

Profit/(loss) before exceptional items 
and tax (I- IV) 

Exceptional Items 

Profit/(loss) before tax  
(V-VI) 

VIII 

Tax expense: 

(1)  Current tax 

(2)  Deferred tax 

IX 

X 

XI 

XII 

Profit (Loss) for the period from  
continuing operations (VII-VIII) 

Profit/(loss) from discontinued operations 

Tax expense of discontinued operations 

Profit/(loss) from Discontinued operations 
(after tax) (X-XI) 

1. Ins. by Notification No. G.S.R. 1022(E), dated 11th October, 2018 (w.e.f. 11-10-2018). 

325 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
XIII 

Profit/(loss) for the period (IX+XII) 

XIV 

Other Comprehensive Income 

A (i) Items that will not be reclassified to 
profit or loss 

(ii) Income tax relating to items that will 
not be reclassified to profit or loss 

B (i) Items that will be reclassified to profit 
or loss 

(ii) Income tax relating to items that will be 
reclassified to profit or loss 

Total Comprehensive Income for the period 
(XIII+XIV)(Comprising Profit (Loss) and 
Other Comprehensive Income for the 
period) 

XV 

XVI 

Earnings per equity share (for continuing 
operation): 

(1)  Basic 

XVII 

(2)  Diluted 
Earnings per equity share (for discontinued 
operation): 

(1)  Basic 

(2)  Diluted 

XVIII  Earnings per equity share(for discontinued 

& continuing operations) 

(1)  Basic 

(2)  Diluted 

See accompanying notes to the financial statements 

Notes: 

GENERAL INSTRUCTIONS FOR PREPARATION OF STATEMENT OF PROFIT AND LOSS 

1. 

The provisions of this Part shall apply to the income and expenditure account, in like manner as they apply to a 

Statement of Profit and Loss. 

2. 

The Statement of Profit and Loss shall include: 

(1) Profit or loss for the period; 

(2) Other Comprehensive Income for the period.  

The sum of (1) and (2) above is ‘Total Comprehensive Income’. 

3.  Revenue from operations shall disclose separately in the notes 

(a)  sale of products (including Excise Duty); 
(b) sale of services; 1*** 
2[(ba) Grants or donations received (relevant in case of section 8 companies only); and] 

                 (c) other operating revenues. 

4. 

Finance Costs: Finance costs shall be classified as- 

(a)  interest; 
(b) dividend on redeemable preference shares; 
(c)  exchange differences regarded as an adjustment to borrowing costs; and 

(d) other borrowing costs (specify nature). 

5 

Other income: Other income shall be classified as- 

1. The word “and” omitted by Notification No. G.S.R. 207(E), dated 24th March, 2021, (w.e.f. 1-4-2021). 
2. Ins. by Notification No. G.S.R. 207(E), dated 24th March, 2021, (w.e.f. 1-4-2021). 

326 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
(a) 
(b) 
(c) 

interest Income; 

dividend Income; and 

other non-operating income (net of expenses directly attributable to such income). 

6. 

Other Comprehensive Income shall be classified into- 

(A) 

Items that will not be reclassified to profit or loss 

(i)  Changes in revaluation surplus; 

(ii)  Remeasurements of the defined benefit plans; 

(iii)  Equity Instruments through Other Comprehensive Income; 

(iv)  Fair value changes relating to own credit risk of financial liabilities designated at fair value through profit or loss; 

(v)  Share of Other Comprehensive Income in Associates and Joint Ventures, to the extent not to be classified into profit or 

loss; and 

(vi)  Others (specify nature). 

(B) 

Items that will be reclassified to profit or loss; 

(i) 

Exchange differences in translating the financial statements of a foreign operation; 

(ii)  Debt Instruments through Other Comprehensive Income; 

(iii)  The effective portion of gains and loss on hedging instruments in a cash flow hedge; 

(iv)  Share of Other Comprehensive Income in Associates and Joint Ventures, to the extent to be classified into 
profit or loss; and 

(v)  Others (specify nature). 

7. 

Additional Information: A Company shall disclose by way of notes, additional information regarding aggregate expenditure 
and income on the following items: 

(a) 

employee Benefits expense [showing separately (i) salaries and wages, (ii) contribution to provident and other funds, 

(iii) share based payments to employees, (iv) staff welfare expenses]. 

(b) 

depreciation and amortisation expense; 

(c) 

 any item of income or expenditure which exceeds one per cent of the revenue from operations or Rs.10,00,000, 
whichever is higher, in addition to the consideration of ‘materiality’ as specified in clause 7 of the General Instructions for 
Preparation of Financial Statements of a Company; 

(d) 

interest Income; 

(e) 

interest Expense; 

(f) 

    dividend income; 

(g) 

net gain or loss on sale of investments; 

(h) 

net gain or loss on foreign currency transaction and translation (other than considered as finance cost); 

(i) 

 payments to the auditor as (a) auditor, (b) for taxation matters, (c) for company law matters, (d) for other 

services, (e) for reimbursement of expenses; 

(j) 

in  case  of  companies  covered  under  section  135,  amount  of  expenditure  incurred  on  corporate  social 

responsibility activities; and 

(k) details of items of exceptional nature; 

327 

 
1[(l) Undisclosed income 

The  Company  shall  give  details  of  any  transaction  not  recorded  in  the  books  of  accounts  that  has  been  surrendered  or 
disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any 
other relevant provisions of the Income Tax Act, 1961), unless there is immunity for disclosure under any scheme and shall 
also state whether the previously unrecorded income and related assets have been properly recorded in the books of account 
during the year. 

(m) Corporate Social Responsibility (CSR) 

Where the company covered under section 135 of the Companies Act, the following shall be disclosed with regard to CSR 
activities:- 

(i) amount required to be spent by the company during the year, 

(ii) amount of expenditure incurred, 

(iii) shortfall at the end of the year, 

(iv) total of previous years shortfall, 

(v) reason for shortfall, 

(vi) nature of CSR activities, 

(vii) details of related party transactions, e.g., contribution to a trust controlled by the company in relation to CSR expenditure 

as per relevant Accounting Standard, 

(viii) where a provision is made with respect to a liability incurred by entering into a contractual obligation, the movements 

in the provision during the year shall be shown separately. 

(n) details of Crypto Currency or Virtual Currency 

Where the Company has traded or invested in Crypto currency or Virtual Currency during the financial year, the following shall 
be disclosed:- 

(i) profit or loss on transactions involving Crypto currency or Virtual Currency, 

(ii) amount of currency held as at the reporting date, 

(iii) deposits or advances from any person for the purpose of trading or investing in Crypto Currency or virtual currency.] 

 8. Changes in Regulatory Deferral Account Balances shall be presented in the Statement of Profit and Loss in 
accordance with the relevant Indian Accounting Standards. 

PART III- GENERAL INSTRUCTIONS FOR THE PREPARATION OF CONSOLIDATED FINANCIAL 
STATEMENTS 

  1.  Where a company is required to prepare Consolidated Financial Statements, i.e., consolidated balance sheet, 
consolidated statement of changes in equity and consolidated statement of profit and loss, the company shall mutatis 
mutandis follow the requirements of this Schedule as applicable to a company in the preparation of balance sheet, 
statement of changes in equity and statement of profit and loss. In addition, the consolidated financial statements shall 
disclose the information as per the requirements specified in the applicable Indian Accounting Standards notified 
under the Companies (Indian Accounting Standards) Rules 2015, including the following, namely:- 

(i) Profit or loss attributable to ‘non-controlling interest’ and to ‘owners of the parent’ in the statement of profit 
and  loss  shall  be  presented  as  allocation  for  the  period.  Further,  ‘total  comprehensive  income’  for  the  period 
attributable to ‘non-controlling interest’ and to ‘owners of the parent’ shall be presented in the statement of profit 
and loss as allocation for the period. The aforesaid disclosures for ‘total comprehensive income’ shall also be made 
in  the  statement  of  changes  in  equity.  In  addition  to  the  disclosure  requirements  in  the  Indian  Accounting 
Standards, the aforesaid disclosures shall also be made in respect of ‘other comprehensive income’. 

(ii) ‘Non-controlling interests’ in the Balance Sheet and in the Statement of Changes in Equity, within equity, 

shall be presented separately from the equity of the ‘owners of the parent’. 

(iii) Investments accounted for using the equity method. 

1. Ins. by Notification No. G.S.R. 207(E), dated 24th March, 2021, (w.e.f. 1-4-2021). 

328 

 
                                                           
  2. 

In Consolidated Financial Statements, the following shall be disclosed by way of additional information: 

Name of the entity in the 
Group 

Parent 

Subsidiaries  
Indian 

         1. 

2. 

3. 

. 

. 

Foreign 

1. 

2. 

3. 

. 

. 

Non-controlling

Interests 
all 

in

 subsidiaries 

Associates (Investment as 
per the equity method) 

Indian 

1. 

2. 

Net Assets, i.e., total 

assets  minus total  
liabilities 
As  %  of 

Share in profit or 
loss 

Share 

in  other 

Share 

in 

total 

comprehensive 
income 

comprehensive 
income 

Amount 

Amount  As % of total 
comprehensi
ve income 

Amount  As  %  of 

Amount  As  %  of 

consolidate
d net assets 

consolidate
d profit or 
loss 

consolidated 
other 
comprehensi
ve income 

329 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign 

1. 

2. 

3. 
. 

. 

Joint Ventures (investment as per 
the equity method) 

Indian 

          1. 

       2. 

      3. 

. 

. 

Foreign 

1. 

2. 

3. 
. 

. 

Total 

3. All subsidiaries, associates and joint ventures (whether Indian or foreign) will be covered under consolidated 

financial statements. 

4. An entity shall disclose the list of subsidiaries or associates or joint ventures which have not been consolidated 

in the consolidated financial statements along with the reasons of not consolidating.] 

1[Division III 

Financial  Statements  for  a  Non-Banking  Financial  Company  (NBFC)  whose  financial  statements  are  drawn  up  in 
compliance of the Companies (Indian Accounting Standards) Rules, 2015. 

GENERAL  INSTURCTIONS  FOR  PREPARATION  OF  FINANCIAL  STATEMENTS  OF  A  NON-BANKING 
FINANCIAL  COMPANY  (NBFC)  THAT  IS  REQUIRED  TO  COMPLY  WITH  INDIAN  ACCOUNTING  STAND- 
ARDS (Ind AS) 

1.  Every Non-Banking Financial company as defined in the  Companies (Indian  Accounting Standards) (Amend- 
ment)  Rules,  2016  to  which  Indian  Accounting  Standards  apply,  shall  prepare  its  financial  statements  in 
accordance with this Schedule or with such modification as may be required under certain circumstances. 

2.  Where  compliance  with  the  requirements  of  relevant  Act,  Regulations,  Guidelines  or  Circulars  issued  by  the 
relevant regulator from time to time including Indian Accounting Standards (Ind AS) (except the option of pre- 
senting assets and liabilities in accordance with current, non-current classification as provided by relevant Ind AS) 
as  applicable  to  the  NBFCs  require  any  change  in  treatment  or  disclosure  including  addition,  amendment, 
substitution or deletion in the head or sub-head or any changes inter se, in the financial statements or statements 
forming  part  thereof,  the  same  shall  be  made  and  the  requirements  under  this  Schedule  shall  stand  modified 
accordingly. 

3.  The disclosure requirements specified in this Schedule are in addition to and not in substitution of the disclosure 
requirements  specified  in  the  Indian  Accounting  Standards. Additional disclosures specified in the Indian  Ac- 
counting Standards shall be made in the Notes or by way of additional statement or statements unless required to 
be disclosed on the face of the Financial Statements. Similarly, all other disclosures as required by the Companies 
Act, 2013 shall be made in the Notes in addition to the requirements set out in this Schedule. 

1. Ins. by Notification No. G.S.R. 1022(E), dated 11th October, 2018 (w.e.f. 11-10-2018). 

330 

 
 
 
 
    
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
4. 

(i)  Notes  shall  contain  information  in  addition  to  that  presented  in  the  Financial  Statements  and  shall  provide 
where required- 

(a)  narrative descriptions or disaggregations of items recognised in those statements; and 

(b) information about items that do not qualify for recognition in those statements. 

(ii) Each item on the face of the Balance Sheet, Statement of Changes in Equity and Statement of Profit and Loss 
shall be cross-referenced to any related information in the Notes. In preparing the Financial Statements   including 
the Notes, a balance shall be maintained between providing excessive details that may not assist users of Financial 
Statements and not providing important information as a result of too much aggregation. 

5.  Depending upon the total income of the NBFC, the figures appearing in the Financial Statements shall be rounded 

off as below: 

Total Income 

Rounding off 

(i) less than one hundred crore rupees 

To the nearest hundreds, thousands, lakhs or millions, or 
decimals thereof. 

(ii) one hundred crore rupees or more 

To the nearest, lakhs, millions or crores, or decimals 
thereof. 

Once a unit of measurement is used, it should be used uniformly in the Financial Statements. 

6.  Financial  Statements  shall  contain  the  corresponding  amounts  (comparatives)  for  the  immediately  preceding 
reporting  period  for  all  items  shown  in  the  Financial  Statements  including  Notes  except  in  the  case  of  first 
Financial Statements after incorporation. 

7.  Financial Statements shall disclose all ‘material’ items, i.e., the items if they could, individually or collectively, 
influence the economic decisions that users make on the basis of the financial statements. Materiality depends on 
the size or nature of the item or a combination of both, to be judged in the particular circumstances. 

8.  For the purpose of this Schedule, the terms used herein shall have the same meanings assigned to them in Indian 

Accounting Standards. 

9.  Where any Act, Regulation, Guidelines or Circulars issued by the relevant regulators from time to time requires 
specific disclosures to be made in the standalone financial statements of an NBFC, the said disclosures shall be 
made in addition to those required under this Schedule. 

10.  The NBFCs preparing financial statements as per this Schedule may change the order of presentation of line items 
on the face of financial statements or order of line items within the schedules in order of liquidity, if appropriate, 
considering the operations performed by the NBFC. 

Note: This Schedule sets out the minimum requirements for disclosure on the face of the Financial Statements, i.e., Balance 
Sheet, Statement of Changes in Equity for the period, the Statement of Profit and Loss for the period (The term ‘Statement of 
Profit and Loss’ has the same meaning as ‘Profit and Loss Account’) and Notes. Cash flow statement shall be prepared, where 
applicable, in accordance with the requirements of the relevant Indian Accounting Standard. 

Line items, sub-line items and sub-totals shall be presented as an addition or substitution on the face of the Financial Statements 
when  such  presentation  is  relevant  to  an  understanding  of  the  NBFC’s  financial  position  or  performance  or  to  cater  to 
categories of NBFCs as prescribed by the relevant regulator or sector-specific disclosure requirements or when required for 
compliance with the amendments to the relevant statutes or under the Indian Accounting Standards. 

331 

 
 
 
 
PART I –BALANCE SHEET 

Name of the Non-Banking Financial Company……………………. 

Balance Sheet as at ……………………… 

Note 
No. 

Figures as at the end of 
current 
reporting 
period 

Figures as at the end of the 
previous reporting period 

2 

3 

(1) 

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

(g) 

(2) 

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

(g) 

(h) 

(i) 

(j) 

(k) 

Particulars 

1 

ASSETS 

Financial Assets 

Cash and cash equivalents 

Bank Balance other than (a) above 

Derivative financial instruments 

Receivables 

(I)  Trade Receivables 

(II) Other Receivables 

Loans 

Investments 

Other Financial assets (to be specified) 

Non-financial Assets 

Inventories 

Current tax assets (Net) 

Deferred tax Assets (Net) 

Investment Property 

Biological assets other than bearer plants 

Property, Plant and Equipment 

Capital work-in-progress 

Intangible assets under development 

Goodwill 

Other Intangible assets 

Other non-financial assets (to be specified) 

Total Assets   

332 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIABILITIES AND EQUITY 

LIABILITIES 

Financial Liabilities 

Derivative financial instruments 

Payables 

(I)Trade Payables 

(i) 

(ii) 

total outstanding dues of micro enterprises and 
small enterprises 

total outstanding dues of creditors other than 
micro enterprises and small enterprises 

(II) Other Payables 

(i) 

total outstanding dues of micro enterprises and 
small enterprises 

(ii) total outstanding dues of creditors other than micro 

enterprises and small enterprises 

Debt Securities 

Borrowings (Other than Debt Securities) 

Deposits 

Subordinated Liabilities 

Other financial liabilities(to be specified) 

Non-Financial Liabilities 

Current tax liabilities (Net) 

Provisions 

Deferred tax liabilities (Net) 

Other non-financial liabilities(to be specified) 

EQUITY 

Equity Share capital 

Other Equity 

(1) 

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

(g) 

(2) 

(a) 

(b) 

(c) 

(d) 

(3) 

(a) 

(b) 

See accompanying notes to the financial statements 

Total Liabilities and 
Equity 

1[STATEMENT OF CHANGES IN EQUITY 

Name of the Company……………………. 

A. Equity Share Capital 

(1) Current reporting period 

Balance at the beginning  
of the current reporting  
period 

Changes in Equity Shares 
Capital due to prior  
period errors  

Restated balance at the 
beginning of the current 
reporting period 

Changes in equity share 
capital during the current 
 year 

Balance at the end of the 
Current reporting period 

1. Subs. by Notification No. G.S.R. 207(E), dated 24th March, 2021, for the Heading “Statement of Changes in Equity” (w.e.f. 1-4-2021). 

333 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
(2) Previous reporting period 

Balance at the beginning  
of the previous reporting  
period 

Changes in Equity Shares 
Capital due to prior  
period errors  

Restated balance at the 
beginning of the previous 
reporting period 

Changes in equity share 
capital during the previous 
 year 

Balance at the end of the 
previous reporting period 

B. Other Equity 

(1) Current reporting period 

Share 
application 
Money 
pending 
allotment 

Equity 
Component 
of 
compound 
financial 
instruments 

Reserves and Surplus 

Capital 
Reserve 

Securities 
Premium 

Other 
Reserves 
(specify 
nature) 

Retained 
Earnings 

Debt 
instrument 
through 
Other 
Comprehens
ive Income 

Equity 
Instruments 
through 
Other 
Comprehens
ive Income 

Revaluati
on 
Surplus 

Effective 
Portion of  
Cash 
Flow 
Hedges 

Exchange 
Differences  
On 
translating 
the financial 
statements 
of a foreign 

Other 
items of  
other 
Compreh
ensive 
Income 
(specify 
nature) 

Total 

Money 
received 
against 
share  
warrants 

Balance at 
the beginning of 
the current 
reporting period 
Changes in 
accounting 
Policy/prior 
Period errors 
Restated  
balance  
at the beginning 
of the current 
reporting period 
Total 
Comprehensive 
Income for the 
current year 
Dividends 

Transfer to  
retained 
earnings 
Any other 
Change (to be 
specified) 
Balance at the 
end of the 
current 
Reporting period 

(2) Previous reporting period 

Share 
application 
Money 
pending 
allotment 

Equity 
Component 
of 
compound 
financial 
instruments 

Reserves and Surplus 

Capital 
Reserve 

Securities 
Premium 

Other 
Reserves 
(specify 
nature) 

Retained 
Earnings 

Debt 
instrument 
through 
Other 
Comprehens
ive Income 

Equity 
Instruments 
through 
Other 
Comprehens
ive Income 

Revaluati
on 
Surplus 

Effective 
Portion of  
Cash 
Flow 
Hedges 

Exchange 
Differences  
On 
translating 
the financial 
statements 
of a foreign 

Other 
items of  
other 
Compreh
ensive 
Income 
(specify 
nature) 

Total 

Money 
received 
against 
share  
warrants 

Balance at 
the beginning of 
the previous 
reporting period 
Changes in 
accounting 
policy/prior 
Period errors 
Restated balance 
at the beginning 
of the previous 
reporting 
period 
Total 
Comprehensive 

334 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income for the 
previous year 
Dividends 

Transfer to 
retained 
earnings 
Any other 
change (to be 
specified) 
Balance at the 
end of the 
previous 
reporting period 

Note: Remeasurement of defined benefit plans and fair value changes relating to own credit risk of financial liabilities designated 
at  fair  value  through  profit  or  loss  shall  be  recognised  as  a  part  of  retained  earnings  with  separate  disclosure  of  such  items 
alongwith the relevant amounts in the Notes or shall be shown as a separate column under Reserves and Surplus.] 

Notes 

GENERAL INSTRUCTIONS FOR PREPARATION OF BALANCE SHEET 

A Non-Banking Financial company shall disclose the following in the notes to accounts: 

(A)  Cash and cash equivalents: Cash and cash equivalents shall be classified as: 

(i)  Cash on hand 

(ii)  Balances with Banks (of the nature of cash and cash equivalents); 

(iii) Cheques, drafts on hand; and 

(iv)  Others (specify nature). 

Cash and Bank balances: The following disclosures with regard to cash and bank balances shall be made: 

(i)  Earmarked balances with banks (for example, for unpaid dividend) shall be separately stated. 

(ii)  Balances with banks to the extent held as margin money or security against the borrowings, guarantees, other 

commitments shall be disclosed separately. 

(iii) Repatriation restrictions, if any, in respect of cash and bank balances shall be separately stated. 

(B)  Derivative financial Instruments 

1 Explain use of derivatives 

2 Cross-reference to Financial Risks section for management of risks arising from derivatives 
(Previous Year) 

(Current Year) 

Part I 

Notional amounts  Fair Value - 

Fair Value - 

Notional amounts  Fair Value - 

Fair Value - 

Assets 

Liabilities 

Assets 

Liabilities 

(i)Currency 
derivatives: 

-Spot and forwards 

-Currency Futures 

-Currency swaps 

-Options purchased 

-Options sold (written)   

-Others 

Sub total (i) 

(ii)Interest rate 
derivatives 

-Forward Rate 
Agreements and 
Interest Rate Swaps 

-Options purchased 

335 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
-Options sold (written)   

-Futures 

-Others 

Subtotal(ii) 

(iii)Credit derivatives   

(iv) Equity linked 
derivatives 

(v) Other derivatives 
(Please specify) 

Total Derivative 
Financial 
Instruments 
(i)+(ii)+(iii)+(iv)+(v) 

Part II 

Included in above 
(Part 
I) are derivatives 
held for hedging 
and risk 
management 
purposes as 
follows: 
(i)Fair value 
hedging: 

- Currency 
derivatives 

- Interest rate 
derivatives 

- Credit derivatives  

- Equity linked 
derivatives 

- Others 

Sub total (i) 

(ii)Cash flow 
hedging: 

- Currency 
derivatives 

- Interest rate 
derivatives 

- Credit derivatives  

- Equity linked 
derivatives 

336 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
- Others 

Sub total (ii) 

(iii)Net investment 
hedging: 

(iv) Undesignated 
Derivatives 

Total Derivative 
Financial 
Instruments (i)+ 
(ii)+(iii)+(iv) 

With respect to hedges and hedge accounting, NBFCs may provide a description in accordance with the requirements of Indian 
Accounting Standards, of how derivatives are used for hedging, explain types of hedges recognized for accounting purposes and 
their usage/application by the entity. 
(C) 

Receivables: 

(i) Receivables shall be sub-classified as: 

(a)  Receivables considered good - Secured; 

(b)  Receivables considered good - Unsecured; 

(c)  Receivables which have significant increase in Credit Risk; and 

(d)  Receivables - credit impaired 

(ii) Allowance for impairment loss allowance shall be disclosed under the relevant heads separately. 

(iii) Debts due by directors or other officers of the NBFC or any of them either severally or jointly with any other person 
or debts due by firms including limited liability partnerships (LLPs), private companies respectively in which any director 
is a partner or a director or a member should be separately stated. 

1[(iv) For trade receivable outstanding, following ageing schedule shall be given: 

Trade Receivables aging schedule 

(Amount in Rs.) 

Particulars 

Outstanding for following periods from due date of payment# 

Less 
than 6 

months 

6  months  -
1 year 

1-2 

years 

2-3 

years 

More than 3 

Total 

years 

(i) Undisputed Trade 
receivables   - 

Considered good 

(ii) Undisputed Trade 

Receivable – which have 
significant increase in 
credit risk 

(iii) Undisputed Trade 

Receivables – credit 

Impaired 

(iv) Disputed Trade 
Receivables-considered 
good 

(v)Disputed Trade 
Receivables- which have 
significant increase in 
credit risk 

(vi) Disputed Trade 
Receivables – credit 

impaired 

1. Ins. by Notification No. G.S.R. 207(E), dated 24th March, 2021, (w.e.f. 1-4-2021). 

337 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
#similar information shall be given where no due date of payment is specified in that case disclosure shall be from the date 
of the transaction. 

Unbilled dues shall be disclosed separately] 

(D) 

Loans 

Amor- 
tised 
cost 

(Current Year) 

At Fair Value 

Through 
profit or 
loss 

Through 
Other 
Compre- 
hensive 
Income 

Designat- 
ed at fair 
value 
through 
profit or 
loss 

Sub 
total 

Total  Amor- 

tised cost 

(Previous Year) 

At Fair Value 

Through 
Other 
Comprehen- 
sive Income 

Through 
profit or 
loss 

Designat- 
ed at fair 
value 
through 
profit or 
loss 

Sub 
total 

Total 

(1) 

(2) 

(3) 

(4) 

(5=2+ 
3+4) 

(6=1 
+ 5) 

(7) 

(8) 

(9) 

(10) 

(11=8+ 
9+10) 

(12=(7) 
+ (11) 

Loans 

(A) 

(i) Bills Purchased and 
Bills Discounted 

(ii) Loans repayable on 
Demand 

(iii) Term Loans 

(iv) Leasing 

(v) Factoring 

(vi)   Others 
specified) 

(to be 

Total (A) -Gross 

Less: Impairment loss 
allowance 

Total (A) - Net 

by 

by 

by 

(B) 

(i)     Secured 
tangible assets 

(ii)Secured 
intangible assets 

(iii)  Covered 
Bank/Government 
Guarantees 

(iv) Unsecured 

Total (B)-Gross 

Less: 
allowance 

Impairment loss 

Total (B)-Net 

(C) (I) Loans in India 

(i) Public Sector 

(ii) Others (to be specified)  

Total (C)- Gross 

Less: 
allowance 

Impairment loss 

Total(C) (I)-Net 

(C) 
outside India 

(II)Loans 

Less: 

Impairment 

loss allowance 

Total (C) (II)- Net 

Total C(I) and C(II) 

338 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Oth- 
ers* 

Total 

(Previous Year) 

At Fair Value 

Total 

Oth- 
ers* 

Sub- 
Total 

(5)=(2)+ 
(3)+(4) 

(6) 

Sub-Total 

(12)=(9)+ 
(10)+(11) 

(13) 

(14)=(8)+ 
(12)+(13) 

(E) Investments 

Investments 

(Current Year) 

At Fair Value 

Amor- 
tised 
cost 

Invest- 
vest- ments 

Through 
Other 
Compre- 
hensive 
Income 

Thro 
ugh 
profit 
or 
loss 

Desig- 
nated at 
fair 
value 
through 
profit 
or loss 

(1) 

(2) 

(3) 

(4) 

Mutual 
funds 

Gov- 
ernment 
securi- ties 

Other ap- 
proved 
securi- ties 

Debt 
securi- ties 

Equity 
instru- 
ments 

Subsid- 
iaries 

Associates 

Joint 
Ven- 
tures 

Others 
(specify) 

Total – 
Gross (A) 

(i) Invest- 
ments 
outside 
India 

(ii) Invest- 
ments in 
India 

Total (B) 

Total 
(A) to tally 
with (B) 

Less: Allow- 
ance for 
Impair- pair- 
ment loss (C) 

Total – Net 
D= (A)-(C) 

Amor- 
tised 
cost 

Through 
Other 
Compre- 
hensive 
Income 

Thro 
ugh 
profit 
or 
loss 

Desig- 
nated 
at fair 
value 
throug 
h   
profit 
or loss 

(7)=(1) 
+ 
(5)+(6) 

(8) 

(9) 

(10) 

(11) 

339 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
* Other basis of measurement such as cost may be explained as a footnote 

(F)  Investment Property 

A reconciliation of the gross and net carrying amounts of each class of property at the beginning and end of the reporting 
period  showing  additions,  disposals,  acquisitions  through  business  combinations  and  other  adjustments  and  the  related 
depreciation and impairment losses or reversals shall be disclosed separately. 

(G) Biological Assets other than bearer plants: 

A reconciliation of the carrying amounts of each class of assets at the beginning and end of the reporting period showing 
additions, disposals, acquisitions through business combinations and other adjustments shall be disclosed separately. 

(H)  Property, Plant and Equipment 

(i) 

Classification shall be given as: 

(a)  Land 

(b)  Buildings 

(c)  Plant and Equipment 

(d)  Furniture and Fixtures 

(e)  Vehicles 

(f)  Office equipment 

(g)  Bearer Plants 

(h)  Others (specify nature) 

(ii)  Assets under lease shall be separately specified under each class of asset. 

1[(iii) reconciliation of the gross and net carrying amounts of each class of assets at the beginning and end of the reporting 
period showing additions, disposals, acquisitions through business combinations, amount of change due to revaluation (if change 
is 10% or more in the aggregate of the net carrying value of each class of Property, Plant and Equipment) and other adjustments 
and the related depreciation and impairment losses or reversals shall be disclosed separately.] 

(I)   Goodwill 

A reconciliation of the gross and net carrying amount of goodwill at the beginning and end of the reporting period showing 
additions, impairments, disposals and other adjustments. 

(J) Other Intangible assets 

(iii) Classification shall be given as: 

(a)  Brands or trademarks 

(b)  Computer software 

(c)  Mastheads and publishing titles 

(d)  Mining rights 

(e)  Copyrights, patents, other intellectual property rights, services and operating rights 

(f)  Recipes, formulae, models, designs and prototypes 

(g)  Licenses and franchises 

(h)  Others (specify nature 

2[(ii) A reconciliation of the gross and net carrying amounts of each class of  assets at the beginning and end of the 
reporting period showing additions, disposals, acquisitions through business combinations, amount of change due to 
revaluation (if change is 10% or more in the aggregate of the net carrying value of each class of intangible assets) and 
other adjustments and the related amortization and impairment losses or reversals shall be disclosed separately.] 

(K) Payables 

The following details relating to Micro, Small and Medium Enterprises shall be disclosed: 

(a)  the principal amount and the interest due thereon (to be shown separately) remaining unpaid to any supplier at the 

1. Subs. by Notification No. G.S.R. 207(E), dated 24th March, 2021, for item (iii) (w.e.f. 1-4-2021). 
2. Subs. by Notification No. G.S.R. 207(E), dated 24th March, 2021, for item (ii) (w.e.f. 1-4-2021). 

340 

 
 
 
 
                                                           
end of each accounting year; 

(b)  the  amount  of  interest  paid  by  the  buyer  in  terms  of  section  16  of  the  Micro,  Small  and  Medium  Enterprises 
Development Act, 2006, along with the amount of the payment made to the supplier beyond the appointed day 
during each accounting year; 

(c)  the  amount of interest due and payable for the  period of delay in  making payment (which have been paid but 
beyond the appointed day during the year) but without adding the interest specified under the Micro, Small and 
Medium Enterprises Development Act, 2006; 

(d)  the amount of interest accrued and remaining unpaid at the end of each accounting year; and 

(e)  the amount of further interest remaining due and payable even in the succeeding years, until such date when the 
interest  dues  above  are  actually  paid  to  the  small  enterprise,  for  the  purpose  of  disallowance  of  a  deductible 
expenditure under section 23 of the Micro, Small and Medium Enterprises Development Act, 2006. 

Explanation.— The terms ‘appointed day’, ‘buyer’, ‘enterprise’, ‘micro enterprise’, ‘small enterprise’ and ‘supplier’, 
shall have the same meaning assigned to those under clauses (b), (d), (e), (h), (m) and (n) respectively of section 2 of 
the Micro, Small and Medium Enterprises Development Act, 2006.” 

1[(KA) For trade payables due for payment, following ageing schedule shall be given: 

Trade Payables aging schedule 

(Amount in Rs.) 

Particulars 

Outstanding for following periods from due date of payment# 

Less 
than  1 
year 

1-2 years 

2-3 years 

More  than  3 
years 

Total 

(i) MSME 

(ii) Others 

(iii) Disputed dues-
MSME 

(iv) Disputed dues-
Others 

#similar information shall be given where no due date of payment is specified in that case disclosure shall 
be from the date of the transaction. 

Unbilled dues shall be disclosed separately] 

(L) Debt Securities 

(Current Year) 

(Previous Year) 

At Amortised 
Cost 

At 
Value 
Through 
profit 
loss 

Fair 

  or 

Designated at 
fair value 
through profit 
or loss 

Total 

At Amortised 
Cost 

At 
Value 
Through 
profit 
loss 

Fair 

  or 

Total 

Designated at 
fair value 
through profit 
or loss 

(1) 

(2) 

(3) 

(4)=(1)+(2)+(3) 

(5) 

(6) 

(7) 

(8)=(5)+(6)+(7) 

Liability 
component of 
compound 
financial 
instruments 

Others (Bonds/ 
Debenture etc.) 

Total (A) 

Debt securities 
in India 

Debt securities 
outside India 

1. Ins. by Notification No. G.S.R. 207(E), dated 24th March, 2021, (w.e.f. 1-4-2021). 

341 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
 
Total (B) to 
tally with (A) 

(i)  bonds or debentures (along with the rate of interest, and particulars of redemption or conversion, as the case may be) 
shall be stated in descending order of maturity or conversion, starting from earliest redemp- tion or conversion date, 
as the case  may be. Where bonds/debentures are redeemable by installments, the date of maturity for this purpose 
must be reckoned as the date on which the first installment becomes due; 

(ii)  particulars of any redeemed bonds or debentures which the NBFC has power to reissue shall be disclosed. 

(M) Borrowings (Other than Debt Securities) 

(Current Year) 

(Previous Year) 

At 
Amortised 
Cost 

At fair value 
Through 
profit or loss 

Total 

Designated  at 
fair 
value 
through  profit 
or loss 

At 
Amortised 
Cost 

At fair value 
Through 
profit or loss 

Total 

Designated  at 
fair 
value 
through  profit 
or loss 

(1) 

(2) 

(3) 

(4)=(1)+(2)+(3)  (1) 

(2) 

(3) 

(4)=(1)+(2)+(3) 

(a)Term loans 

(i)from banks 

(ii)from other parties 

(b)Deferred payment 
liabilities 

(c)Loans from related 
parties 

(d) Finance lease 
obligations 

(e)Liability 
component of 
compound financial 
instruments 

(f)Loans repayable on 
demand 

(i)from banks 

(ii)from other parties 

Other 

(g) 
(specify nature) 

loans 

Total (A) 

Borrowings in India 

Borrowings 
India 

outside 

Total (B) to tally 
with (A) 

(i)  Borrowings shall further be sub-classified as secured and unsecured. Nature of security shall be specified separately in 

each case. 

(ii)  Where borrowings have been guaranteed by directors or others, the aggregate amount of such borrowings under each 

head shall be disclosed; 

(iii)  terms of repayment of term loans and other loans shall be stated; and 

(iv)  period and amount of default as on the balance sheet date in repayment of borrowings and interest shall be specified 

separately in each case. 

(N)  Deposits 

At Amortised 
Cost 

(Current Year) 

At fair 
value 
through 
profit or 
loss 

Total 

Designated at 
fair value 
through profit 
or loss 

At Amortised 
Cost 

(Previous Year) 

At fair 
value 
through 
profit or 
loss 

Total 

Designated at 
fair value 
through profit 
or loss 

(1) 

(2) 

(3) 

(4)=(1)+(2)+(3) 

(5) 

(6) 

(7) 

(8)=(5)+(6)+(7) 

Deposits 

(i) Public 

Deposits 

342 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(ii) From 
Banks 

(iii)From 

Others 

Total 

(O) Subordinated Liabilities 

At 
Amortised 
Cost 

(Current Year) 

At fair 
value 
through 
profit or 
loss 

Designated 
at fair 
value 
through 
profit or 
loss 

Total 

At   
Amortised 
Cost 

(Previous Year) 

At fair 
value 
through 
profit or 
loss 

Designated at 
fair value 
through 
profit or loss 

Total 

(1) 

(2) 

(3) 

(4)=(1)+(2)+(3) 

(5) 

(6) 

(7) 

(8)=(5)+ (6)+(7) 

Perpetual Debt 
Instruments to the 
extent that do not 
qualify as equity 

Preference Shares 
other than those 
that qualify as 
Equity 

Others (specifying 
the nature and type 
of instrument 
issued) 

Total (A) 

Subordinated 
Liabilities in India 

Subordinated 
Liabilities outside 
India 

Total (B) to tally 
with (A) 

(P) Other Financial Liabilities (to be specified): Other Financial liabilities shall be classified as- 

(a)  Interest accrued; 

(b)  Unpaid dividends; 

(c)  Application money received for allotment of securities to the extent refundable and interest accrued thereon; 

(d)  Unpaid matured deposits and interest accrued thereon; 

(e)  Unpaid matured debentures and interest accrued thereon; 

(f)  Margin money (to be specified);and 

(g)  Others (specify nature) 

(Q) Provisions: The amounts shall be classified as- 

(a) Provision for employee benefits; and 

(b) Others (specify nature) 

(R)  Other Non-financial liabilities (to be specified): 

(a) Revenue received in advance; 

(b) Other advances (Specify nature); and 

343 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(c) Others (specify nature). 

(S) Equity Share Capital : For each class of equity share capital: 

(a)  the number and amount of shares authorized; 

(b)  the number of shares issued, subscribed and fully paid, and subscribed but not fully  paid; 

(c)  par value per share; 

(d)  a reconciliation of the number of shares outstanding at the beginning and at the end of the period; 

(e)  the rights, preferences and restrictions attaching to each class of shares including restrictions on the distribution 

of dividends and the repayment of capital; 

(f)  shares  in  respect  of  each  class  in  the  company  held  by  its  holding  company  or  its  ultimate  holding  company 
including shares held by or by subsidiaries or associates of the holding company or the ultimate holding company 
in aggregate; 

(g)  shares in the company held by each shareholder holding more than five percent shares specifying the number of 

shares held; 

(h)  shares  reserved  for  issue  under  options  and  contracts/commitments  for  the  sale  of  shares  or  disinvestment, 

including the terms and amounts; 

(i)  For the period of five years immediately preceding the date at which the Balance Sheet is prepared: 

•  Aggregate  number and class  of shares allotted as  fully paid up pursuant to contract  without payment 

being received in cash; 

•  Aggregate number and class of shares allotted as fully paid up by way of bonus shares; and 

•  Aggregate number and class of shares bought back; 

(j) 

terms of any securities convertible into equity shares issued along with the earliest date of conversion in 
descending order starting from the farthest such date; 

(k)  calls unpaid (showing aggregate value of calls unpaid by directors and officers); 

(l)  forfeited shares (amount originally paid up) 

(m) An NBFC shall disclose information that enables users of its financial statements to evaluate the NBFC’s 

objectives, policies and processes for managing capital. 

1[(n) A Company shall disclose Shareholding of Promoter* as below: 

Shares held by promoters at the end of the year 

% Change during the year*** 

S.No 

Promoter Name 

No. of 
Shares** 

%of 
total 
shares**  

Total 

*Promoter here means promoter as defined in the Companies Act, 2013. 

** Details shall be given separately for each class of shares 

*** percentage change shall be computed with respect to the number at the beginning of the year or if issued during 
the year for the first time then with respect to the date of issue.] 

(T)  Other Equity 

(i)  Other Reserves’ shall be classified in the notes as: 

(a)  Capital Redemption Reserve; 
(b)  Debenture Redemption Reserve; 
(c)  Share Options Outstanding Account; 
(d)  Statutory Reserves; and 
(e)  Others – (specify the nature and purpose of each reserve and the amount in respect thereof); 

(Additions and deductions since last balance sheet to be shown under each of the specified heads) 

(iii) 

  Retained Earnings represents  surplus i.e. balance of the  relevant column  in the Statement of Changes  in 

1. Ins. by Notification No. G.S.R. 207(E), dated 24th March, 2021, (w.e.f. 1-4-2021). 

344 

 
 
 
 
 
                                                           
Equity; 

(iv)  A reserve specifically represented by earmarked investments shall disclose the fact that it is so represented; 
(v)  Debit balance of Statement of Profit and Loss shall be shown as a negative figure under the head ‘retained 
earnings’. Similarly, the balance of ‘Other Equity’, after adjusting negative balance of retained earnings, if 
any, shall be shown under the head ‘Other Equity’ even if the resulting figure is in the negative; 

(vi)  Under the sub-head ‘Other Equity’, disclosure shall be made for the nature and amount of each item; and 
(vii)  Under the sub-head ‘Other Equity’, disclosure  shall be made for conditions or restrictions for distribution 

attached to statutory reserves. 

(U)  Contingent Liabilities and commitments  (to the extent not provided for) 

(i)  Contingent Liabilities shall be classified as: 

(a)  Claims against the company not acknowledged as debt; 
(b)  Guarantees excluding financial guarantees; and 
(c)  Other money for which the company is contingently liable 

(ii)  Commitments shall be classified as: 

(a)  Estimated amount of contracts remaining to be executed on capital account and not pro- 

vided for; 

(b)  Uncalled liability on shares and other investments partly paid; 
(c)  Other commitments (specify nature). 

(V) 

The amount of dividends proposed to be distributed to equity and preference shareholders for the period and the related 
amount per share shall be disclosed separately. Arrears of fixed cumulative dividends on irredeemable preference 
shares shall also be disclosed separately. 

(W)  Where in respect of an issue of securities made for a specific purpose the whole or part of amount has not 
been used for the specific purpose at the Balance Sheet date, there shall be indicated by way of note how 
such unutilized amounts have been used or invested. 

1[(WA)  Where  the  company  has  not  used  the  borrowings  from  banks  and  financial  institution  for  the  specific 
purpose for which  it was taken at the balance sheet date, the company shall disclose the details of where 
they have been used; 

(WB) Additional Regulatory Information 

(i) Title deeds of Immovable Properties not held in name of the Company 

The  company  shall  provide  the  details  of  all  the  immovable  property  (other  than  properties  where  the 
Company is the lessee and the lease agreements are duly executed in favour of the lessee) whose title deeds 
are not held in the name of the company in following format and where such immovable property is jointly 
held with others, details are required to be given to the extent of the company‘s share. 

title 
is 

Whether 
deed  holder 
promoter, 
or 
director 
relative 
of 
promoter/director 
or  employee  of 
promoter/director 
- 

# 

Property  held 
since  which 
date 

Reason  for  not 
being held in the 
the 
of 
name 
company** 

- 

*** also 
Indicate 
dispute 

if 

in 

Description 
of  item  of 
property 

Gross 
carrying 
value 

Title  deeds 
held  in  the 
name of 

Relevant  
line item  
in the  
Balance  
sheet 

- 

- 

Land 
Building 

Land 
Building 

Land 
Building 

PPE 
- 

Investment 
Property 
-    

Non-
current 
asset  held 
for sale 

1. Ins. by Notification No. G.S.R. 207(E), dated 24th March, 2021, (w.e.f. 1-4-2021).  

345 

 
 
 
 
 
 
 
 
                                                           
others 

#Relative here means relative as defined in the Companies Act, 2013. 

*Promoter here means promoter as defined in the Companies Act, 2013. 

 (ii) The company shall disclose as to whether the fair value of investment property (as measured for disclosure 
purposes in the financial statements) is based on the valuation by a registered valuer as  defined under rule 2 of 
Companies (Registered Valuers and Valuation) Rules, 2017. 

(iii) Where the Company has revalued its Property, Plant and Equipment (including Right-of-Use Assets), the 
company shall disclose as to whether the revaluation is based on valuation by a Registered Valuer as defined under 
rule 2 of Companies (Registered Valuers and Valuation) Rules, 2017. 

(iv)  Where  the  Company  has  revalued  its  Intangible  assets,  the  company  shall  disclose  as  to  whether  the 
revaluation is based on valuation by a Registered Valuer as defined under rule 2 of Companies (Registered Valuers 
and Valuation) Rules, 2017. 

(v) Following disclosures shall be made where loans or advances in the nature of loans are granted to promoters, 
directors, KMPs and the related parties (as defined under the Companies Act, 2013), either severally or jointly with 
any other person that are: 

(a) repayable on demand or 

(b) without specifying any terms or period of repayment 

Type of Borrower 

Amount of loan or advances in the nature 
of loan outstanding 

Percentage to the total  

Loans and Advances in the 
nature of loans 

Promoter 

Directors 

KMPs 

Related parties 

(iv) Capital-work-in Progress (CWIP) 

(a) For Capital-work-in progress, following ageing schedule shall be given: 

CWIP aging schedule 

                                                                                                                         (Amount in Rs.) 

CWIP 

Amount in CWIP for a period of 

Total* 

Less than 1 year  1-2 years 

2-3 years 

than  3 

More 
years 

Projects 
progress 

in 

Projects 
temporarily 
suspended 

*Total shall tally with CWIP amount in the balance sheet. 

(b) For capital-work-in progress, whose completion is overdue or has exceeded its cost compared to its original 

plan, following CWIP completion schedule shall be given**: 

                                                                                                                                              (Amount in Rs.) 

CWIP 

Project 1 

Less than 1 year 

1-2 years 

2-3 years 

More than 3 years 

To be completed in 

346 

 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Project 2” 

** Details of projects where activity has been suspended shall be given separately. 

(vii) Intangible assets under development: 

(a) For Intangible assets under development, following ageing schedule shall be given: 

Intangible assets under development aging schedule 

                                                                                                                        (Amount in Rs.) 

Intangible 
assets 
under development 

Amount in CWIP for a period of 

Total* 

Less than 1 year 

1-2 years 

2-3 years 

than  3 

More 
years 

Projects in  

progress 

Projects 
temporarily 
suspended 

*Total shall tally with the amount of Intangible assets under development in the balance sheet. 

(b) For Intangible assets under development, whose completion is overdue or has exceeded its cost compared to its 
original plan, following Intangible assets under development completion schedule shall be given**: 

To be completed in 

than  1 

1-2 years 

2-3 years 

More than 3 years 

(Amount in Rs.) 

Intangible  assets  under 
development 

Less 
year 

Project 1 

Project 2 

        **Details of projects where activity has been suspended shall be given separately. 

(viii) Details of Benami Property held 

Where any proceedings have been initiated or pending against the company for holding any benami property under the 
Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and rules made thereunder, the company shall disclose the 
following:- 

(a) Details of such property, 

(b) Amount thereof, 

(c) Details of Beneficiaries, 

(d) If property is in the books, then reference to the item in the Balance Sheet, 

(e) If property is not in the books, then the fact shall be stated with reasons, 

(f) Where there are proceedings against the company under this law as an abetter of the transaction or as the transferor 

then the details shall be provided. 

(g) Nature of proceedings, status of same and company‘s view on same. 

(ix) Where the Company has borrowings from banks or financial institutions on the basis of security of current assets, it shall 

disclose the following:- 

(a) whether quarterly returns or statements of current assets filed by the Company with banks or financial institutions 

are in agreement with the books of accounts, 

(b) if not, summary of reconciliation and reasons of material discrepancies if any to be adequately disclosed. 

347 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(X) Wilful Defaulter* 

Where a company is a declared wilful defaulter by any bank or financial Institution or other lender, following details 
shall be given, namely:-  

(a) date of declaration as wilful defaulter, 

(b) details of defaults (amount and nature of defaults). 

*wilful defaulter‖ here means a person or an issuer who or which is categorized as a  willful defaulter by any bank or 
financial institution (as defined under the Companies Act, 2013) or consortium thereof, in accordance with the guidelines 
on wilful defaulters issued by the Reserve Bank of India. 

(xi) Relationship with Struck off Companies 

Where the company has any transactions with the companies struck off under section 248 of Companies Act, 2013 or section 
560 of Companies Act, 1956, the Company shall disclose the following details, 

Name 
Company 

of 

struck 

off 

Nature  of  transactions  with 
struck-off Company 

Balance outstanding 

Relationship with the Struck 
off  company,  if  any,  to  be 
disclosed 

Investment in securities 

Receivables 

Payables 

Shares  held  by  stuck  off 
company 

Other  outstanding  balances 
(to be specified) 

(xii) Registration of charges or satisfaction with Registrar of Companies (ROC) 

Where any charges or satisfaction yet to be registered with ROC beyond the statutory period, details and reasons thereof shall be 
disclosed. 

(xiii) Compliance with number of layers of companies 

Where the company has not complied with the number of layers prescribed under clause (87) of section 2 of the Act read with 
Companies (Restriction on number of Layers) Rules, 2017, the name and CIN of the companies beyond the specified layers and 
the relationship/extent of holding of the company in such downstream companies shall be disclosed. 

(xiv) Following Ratios shall be disclosed 

(a) Capital to risk-weighted assets ration (CRAR) 

(b) Tier I CRAR 

(C) Tier II CRAR 

(d) Liquidity Coverage Ratio 

(xv) Compliance with approved Scheme(s) of Arrangements 

Where  any  Scheme  of  Arrangements  has  been  approval  by  the  Competent  Authority  in  terms  of  section  230  to  237  of  the 
Companies Act, 2013, the Company shall disclose that the effect of such Scheme of Arrangements have been accounted for in 
the  books  of  account  of  the  Company  ‘in  accordance  with  the  Scheme’  and  ‘in  accordance  with  accounting  standards’.  Any 
deviation in this regard shall be explained. 

(xvi) Utilisation of Borrowed funds and share premium: 

(A) Where company has advanced or loaned or invested funds (either borrowed funds or share premium or any other sources or 
kind of funds) to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding (whether 
recorded in writing or otherwise) that the Intermediary shall 

(i) 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 

348 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(ii) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries; 

the company shall disclose the following:- 

(I) date and amount of fund advanced or loaned or invested in Intermediaries with complete details of each Intermediary. 

(II) date and amount of fund further advanced or loaned or invested by such Intermediaries to other intermediaries or 

Ultimate Beneficiaries alongwith complete details of the ultimate beneficiaries. 

(III) date and amount of guarantee, security or the like provided to or on behalf of the Ultimate Beneficiaries 

(IV) declaration that relevant provisions of the Foreign Exchange Management Act, 1999 (42 of 1999) and Companies 
Act  has  been  complied  with  for  such  transactions  and  the  transactions  are  not  violative  of  the  Prevention  of  Money-
Laundering act, 2002 (15 of 2003).; 

(B) Where a company has received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) 

with the understanding (whether recorded in writing or otherwise) that the company shall 

(i) 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 

(ii)  provide  any guarantee, security or the  like  on behalf of the Ultimate Beneficiaries, the company  shall  disclose the 

following:- 

(I) date and amount of fund received from Funding parties with complete details of each Funding party. 

(II)  date  and  amount  of  fund  further  advanced  or  loaned  or  invested  other  intermediaries  or  Ultimate  Beneficiaries 

alongwith complete details of the other intermediaries‘ or ultimate beneficiaries. 

(III) date and amount of guarantee, security or the like provided to or on behalf of the Ultimate Beneficiaries 

(IV) declaration that relevant provisions of the Foreign Exchange Management Act, 1999 (42 of 1999) and Companies 
Act  has  been  complied  with  for  such  transactions  and  the  transactions  are  not  violative  of  the  Prevention  of  Money-
Laundering act, 2002 (15 of 2003).;] 

(X)  Other Classification related General Instructions 

1. 

 When an NBFC applies an accounting policy retrospectively or makes a restatement of items in the 
financial statements or when it reclassifies items in its financial statements, the NBFC shall attach to 
the Balance Sheet, a “Balance Sheet” as at the beginning of the earliest comparative period presented. 
2.  Share application money pending allotment shall be classified into equity or liability in accordance with 
relevant Indian Accounting Standards. Share application money to the extent not refundable shall be 
shown under the head Equity and share application money to the extent refundable shall be separately 
shown under ‘Other financial liabilities’. 

3.  Preference shares including premium received on issue, shall be classified and presented as ‘Equity’ or 
‘Liability’  in  accordance  with  the  requirements  of  the  relevant  Indian  Accounting  Standards. 
Accordingly, the disclosure and presentation requirements in this regard applicable to the relevant class 
of equity or liability shall be applicable mutatis mutandis to the preference shares. For instance, plain 
vanila redeemable preference shares shall be classified and presented under ‘liabilities’ as ‘borrowings’ 
or ‘subordinated liability’ and the disclosure requirements in this regard applicable to such borrowings 
shall be applicable mutatis mutandis to redeemable preference shares. 

4.  Compound financial instruments such as convertible debentures, where split into equity and liability 
components, as per the requirements of the relevant Indian Accounting Standards, shall be classified 
and presented un- der the relevant heads in ‘‘Liabilities and Equity’. 

5.  Regulatory Deferral Account Balances shall be presented in the Balance Sheet in accordance with the 

relevant Indian Accounting Standards. 

349 

 
PART II – STATEMENT OF PROFIT AND LOSS 

Name of the Non-Banking Financial Company……………………. 

Statement of Profit and Loss for the period ended ……………………… 

(Rupees in ...................... ) 

Note No. 

Figures for the current 
reporting period 

Figures for the previous 
reporting period 

Particulars 

Revenue from operations 

Interest Income 

Dividend Income 

Rental Income 

Fees and commission Income 

Net gain on fair value changes 

Net gain on derecognition of financial instruments under 
amortised cost category 

Sale of products(including Excise Duty) 

Sale of services 

Others (to be specified) 

Total Revenue from operations 

Other Income (to be specified) 

Total Income (I+II) 

Expenses 

Finance Costs 

Fees and commission expense 

Net loss on fair value changes 

Net loss on derecognition of financial instruments under 
amortised cost category 

Impairment on financial instruments 

Cost of materials consumed 

Purchases of Stock-in-trade 

Changes in Inventories of finished goods, stock-in-trade 
and work-in- progress 

Employee Benefits Expenses 

Depreciation, amortization and impairment 

Others expenses (to be specified) 

Total Expenses (IV) 

Profit / (loss) before exceptional items and tax (III-IV) 

Exceptional items 

(i) 

(ii) 

(iii) 

(iv) 

(v) 

(vi) 

(vii) 

(viii) 

(ix) 

(i) 

(ii) 

(iii) 

(iv) 

(v) 

(vi) 

(vii) 

(viii) 

(ix) 

(x) 

(xi) 

(I) 

(II) 

(III) 

(IV ) 

(V ) 

(VI ) 

(VII ) 

Profit/(loss) before tax (V -VI ) 

(VIII) 

Tax Expense: 

(1)  Current Tax 

(2)  Deferred Tax 

350 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Particulars 

Note No.  Figures for the current 
reporting period 

Figures for the 
previous 
reporting 
period 

(IX) 

(X) 

(XI) 

(XII) 

Revenue from operations 

Profit    /    (loss) 
operations(VII-VIII) 

for the period from continuing 

Profit/(loss) from discontinued operations 

Tax Expense of discontinued operations 

Profit/(loss) from discontinued operations(After tax) (X- 
XI) 

(XIII) 

Profit/(loss) for the period (IX+XII) 

(XIV) 

Other Comprehensive Income 

(A) (i) Items that will not be reclassified to profit or loss 

(specify items and amounts) 

(ii) Income tax relating to items that will not be 
reclassified to profit or loss 

Subtotal (A) 

(B) (i) Items that will be reclassified to profit or loss 

(specify items and amounts) 

(ii) Income tax relating to items that will be reclassified 
to profit or loss 

Subtotal (B) 

Other Comprehensive Income (A + B) 

(XV) 

Total  Comprehensive 
the  period 
(XIII+XIV)  (Comprising  Profit  (Loss)  and  other 
Comprehensive Income for the period) 

Income 

for 

(XVI) 

Earnings per equity share (for continuing operations) 

Basic (Rs.) 

Diluted (Rs.) 

(XVII) 

Earnings per equity share (for discontinued 
operations) 

Basic (Rs.) 

Diluted (Rs.) 

(XVIII) 

Earnings per equity share (for continuing and 
discontinued operations) 

Basic (Rs.) 

Diluted (Rs.) 

See accompanying notes to the financial statements 

351 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes 

GENERAL INSTRUCTIONS FOR PREPARATION OF STATEMENT OF PROFIT AND LOSS 

1. 

The provisions of this Part shall apply to the income and expenditure account, in like manner as they apply to a 
Statement of Profit and Loss. 

2. 

The Statement of Profit and Loss shall include: 

(A) Profit or loss for the period; 

(B) Other Comprehensive Income for the period. 

The sum of (A) and (B) above is ‘Total Comprehensive Income’. 

3. Interest Income 

Particulars 

(Current Year) 

On Financial Assets 
measured at 
Amortised Cost 

On Financial 
Assets measured 
at fair value 
through OCI 

On Financial 
Assets 
measured at 
fair value 
through OCI 

Interest 
Income on 
Financial 
Assets 
classified at 
fair value 
through profit 
or loss 

(Previous Year) 

On Financial 
Assets measured 
at Amortised Cost 

Interest 
Income on 
Financial 
Assets 
classified at 
fair value 
through profit 
or loss 

Interest on Loans 

Interest income from 
investments 

Interest on deposits with 
Banks 

Other interest Income 

Total 

4. Net gain/ (loss) on fair value changes* 

Particulars 

(Current Year) 

(Previous Year) 

(A) Net gain/ (loss) on financial instruments at fair 
value through profit or loss 

(i) On trading portfolio 

- Investments 

- Derivatives 

- Others 

(ii) On financial instruments designated at fair value 
through profit or loss 

(B) Others ( to be specified) 

Total Net gain/(loss) on fair value changes (C) 

Fair Value changes: 

-Realised 

-Unrealised 

Total Net gain/(loss) on fair value changes(D) to tally 
with (C) 

*Fair value changes in this schedule are other than those arising on account of accrued interest income/expense. 

352 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5. Other Income (to be specified) 

Particulars 

(Current Year) 

(Previous Year) 

Net gain/(loss) on ineffective portion of hedges 

Net gain/(loss) on derecognition of property, plant and equipment 

Net gain or loss on foreign currency transaction and translation (other than 
considered as finance cost)( to be specified) 

Others ( to be specified)* 

Total 

* Any item under the subhead ‘Others’ which exceeds one per cent of the total income to be presented separately. 
6.  Finance Costs 

Particulars 

(Current Year) 

(Previous Year) 

On Financial 

On Financial liabilities 

On Financial 

On Financial 

liabilities 

measured at Amortised 

liabilities measured 

liabilities measured 

measured at fair 

Cost 

at fair value through 

at Amortised Cost 

value through 

profit or loss 

profit or loss 

Interest on deposits 

Interest on borrowings 

Interest on debt securities 

Interest on subordinated liabilities 

Other interest expense 

Total 

7. Employee Benefits Expenses 

Particulars 

(Current Year) 

(Previous Year) 

Salaries and wages 

Contribution to provident and other funds 

Share Based Payments to employees 

Staff welfare expenses 

Others (to be specified) 

Total 

8. Impairment on financial instruments 

(Current Year) 

(Previous Year) 

On Financial instruments 
measured at fair value 
through OCI 

On Financial 
instruments 
measured at 
Amortised Cost 

On Financial 
instruments 
measured at fair 
value through OCI 

On Financial 
instruments 
measured at 
Amortised Cost 

Particulars 

Loans 

Investments 

Others (to be specified) 

Total 

353 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9. Other expenses (to be specified) 

Particulars 

(Current Year) 

(Previous Year) 

Rent, taxes and energy costs 

Repairs and maintenance 

Communication Costs 

Printing and stationery 

Advertisement and publicity 

Director’s fees, allowances and expenses 

Auditor’s fees and expenses 

Legal and Professional charges 

Insurance 

Other expenditure 

Total 

* Any item under the subhead ‘Others expenditure’ which exceeds one per cent of the total income to be presented 
separately. 

10.  Other Comprehensive Income shall be classified into- 

(A) Items that will not be reclassified to profit or loss 

i. 

Changes in revaluation surplus; 

ii.  Remeasurements of the defined benefit plans; 

iii.  Equity Instruments through Other Comprehensive Income; 

iv.  Fair value changes relating to own credit risk of financial liabilities designated at fair value through 

profit or loss; 

v. 

Share of Other Comprehensive Income in Associates and Joint Ventures, to the extent not to be classi- 
fied into profit or loss; and 

vi.  Others (specify nature). 

(B)  Items that will be reclassified to profit or loss; 

i. 

Exchange differences in translating the financial statements of a foreign operation; 

ii.  Debt Instruments through Other Comprehensive Income; 

iii.  The effective portion of gains and loss on hedging instruments in a cash flow hedge; 

iv.  Share of Other Comprehensive Income in Associates and Joint Ventures, to the extent to be classified 

into profit or loss; and 

v.  Others (specify nature). 

11.  Additional Information: An NBFC shall disclose by way of notes, additional information regarding aggregate 

expenditure and income on the following items: 

i.  Depreciation, amortisation and impairment 

ii.  payments to the auditor as (a) auditor, (b) for taxation matters, (c) for company law matters, (d) for other 

services, (e) for reimbursement of expenses; 

iii.  in case of NBFCs covered under section 135, amount of expenditure incurred on corporate social responsi- 

bility activities; and 

iv.  details of items of exceptional nature 
1[v. undisclosed income 

1. Ins. by Notification No. G.S.R. 207(E), dated 24th March, 2021, (w.e.f. 1-4-2021). 

354 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
The  Company  shall  give  details  of  any  transactions  not  recorded  in  the  books  of  accounts  that  has  been 
surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such 
as, search or survey or any other relevant provisions of the Income Tax Act, 1961), unless there is immunity for 
disclosure under any scheme. Also, state whether the previously unrecorded income and related assets have been 
properly recorded in the books of account during the year. 

vi. Corporate Social Responsibility (CSR) 

Where the company (NBFC) covered under section 135 of the Companies Act, the following shall be disclosed with 
regard to CSR activated:- 

 (a) amount required to be spent by the company during the year, 

                      (b) amount of expenditure incurred, 

(c) shortfall at the end of the year, 

(d) total of previous years shortfall, 

(e) reason for shortfall, 

(f) nature of CSR activities, 

(g) details of related party transactions, e.g., contribution to a trust controlled by the company in relation to CSR 
expenditure as per relevant Accounting Standard, 

(h)  where  a  provision  is  made  with  respect  to  a  liability  incurred  by  entering  into  a  contractual  obligation,  the 
movements in the provision during the year shall be shown separately. 

   vii details of Crypto Currency or Virtual Currency 

Where the Company has traded or invested in Crypto currency or virtual Currency during the financial year, the following 
shall be disclosed:- 

                (a) profit or loss on transactions involving Crypto currency or Virtual Currency. 

                (b) amount of currency held as at the reporting date. 

                (c)  deposits  or  advances  from  any  person  for  the  purpose  of  trading  or  investing  in  Crypto  Currency  or  virtual   

currency.] 

PART III-  GENERAL INSTRUCTIONS FOR THE PREPARATION OF CONSOLIDATED 

FINANCIAL STATEMENTS 

(1)  Where  a  Non-Banking  Financial  Company  (NBFC)  is  required  to  prepare  Consolidated  Financial 
Statements,  i.e.,  consolidated  balance  sheet,  consolidated  statement  of  changes  in  equity  and 
consolidated statement of profit and loss, the NBFC shall mutatis mutandis follow the requirements of 
this Schedule as applicable to an NBFC  in the preparation of balance sheet, statement of changes in 
equity and statement of profit and loss. However, where the consolidated financial statements contains 
elements pertaining to NBFCs and other than NBFCs, mixed basis of presentation may be followed for 
consolidated  financial  statements  where  both  kinds  of  opera-  tions  are  significant.  In  addition,  the 
consolidated financial statements shall disclose the information as per the requirements specified in the 
applicable Indian Accounting Standards notified under the Companies (Indian Ac- counting Standards) 
Rules 2015, including the following, namely:- 

(i) Profit or loss attributable to ‘non-controlling interest’ and to ‘owners of the parent’ in the statement 
of  profit  and  loss  shall  be  presented  as  allocation  for  the  period.  Further,  ‘total  comprehensive 
income’ for the period attributable to ‘non-controlling interest’ and to ‘owners of the parent’ shall 
be  presented  in  the  statement  of  profit  and  loss  as  allocation  for  the  period.  The  aforesaid 
disclosures for ‘total comprehensive income’ shall also be made in the statement of changes in 
equity. In addition to the disclosure requirements in the Indian Accounting Standards, the aforesaid 
disclosures shall also be made in respect of ‘other comprehensive income’. 

(ii) ‘Non-controlling interests’ in the Balance Sheet and in the Statement of Changes in Equity, within 

equity, shall be presented separately from the equity of the ‘owners of the parent’. 

(iii)  Investments accounted for using the equity method. 

355 

 
 
 
(2) In Consolidated Financial Statements, the following shall be disclosed by way of additional information: 

Name 
of 
the    entity 
in 
the 
Group 

ent 

Subsidiaries 

Indian 

1. 

2. 
3. 
. 
. 
Foreign 

1. 

2. 
3. 
. 
. 
Non- 
controlling 
Interests in 
all 
subsidiaries 
Associates 
(Investment 
as per the 
equity 
method) 
Indian 

1. 

2. 
3. 
. 
. 

Foreign 

1. 

2. 
3. 
. 
. 
Joint 

Net Assets, i.e., total assets 
minus total liabilities 

Share in profit or loss 

Share 
comprehensive income 

in 

other 

Share 
comprehensive income 

in 

total 

Amount 

As  %  of 
consolidated 
net assets 

Amount 

As  %  of 
consolidated 
profit  or loss 

of 

As  % 
consolidated 
other 
comprehensive 
income 

Amount 

As  %  of  total 
comprehensive 
income 

Amount 

356 

 
 
 
 
 
 
 
 
 
 
 
Ventures(as 
per 
the 
equity 
method) 
Indian 

1. 

2. 
3. 
. 
. 

Foreign 

1. 

2. 
3. 
. 
. 

Total 

All subsidiaries, associates and joint ventures (whether Indian or foreign) will be covered under consolidated 

(3) 
financial statements. 

(4)  An entity shall disclose the list of subsidiaries or associates or joint ventures which have not been 
consolidated in the consolidated financial statements along with the reasons of not consolidating.] 

357 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SCHEDULE IV 

[See section 149(8)] 

CODE FOR INDEPENDENT DIRECTORS 

The Code is a guide to professional conduct for independent directors. Adherence to these standards by 
independent  directors  and  fulfilment  of  their  responsibilities  in  a  professional  and  faithful  manner  will 
promote  confidence  of  the  investment  community,  particularly  minority  shareholders,  regulators  and 
companies in the institution of independent directors. 

I. Guidelines of professional conduct: 

An independent director shall: 

(1)  uphold ethical standards of integrity and probity; 
(2)  act objectively and constructively while exercising his duties; 
(3)  exercise his responsibilities in a bona fide manner in the interest of the company; 
(4)  devote  sufficient  time  and  attention  to  his  professional  obligations  for  informed  and  balanced 

decision making; 

(5)  not  allow  any  extraneous  considerations  that  will  vitiate  his  exercise  of  objective  independent 
judgment in the paramount interest of the company as a whole, while concurring in or dissenting 
from the collective judgment of the Board in its decision making; 

(6)  not abuse his position to the detriment of the company or its shareholders or for the purpose of 

gaining direct or indirect personal advantage or advantage for any associated person; 

(7)  refrain from any action that would lead to loss of his independence; 
(8)  where  circumstances  arise  which  make  an  independent  director  lose  his  independence,  the 

independent director must immediately inform the Board accordingly; 
(9)  assist the company in implementing the best corporate governance practices. 

II. Role and functions: 

The independent directors shall: 

(1)  help in bringing an independent judgment to bear on the Board’s deliberations especially on issues 
of strategy, performance, risk management, resources, key appointments and standards of conduct; 

(2)  bring an objective view in the evaluation of the performance of board and management; 
(3)  scrutinise the performance of management in meeting agreed goals and objectives and monitor the 

reporting of performance; 

(4)  satisfy  themselves  on  the  integrity  of  financial  information  and  that  financial  controls  and  the 

systems of risk management are robust and defensible; 

(5)  safeguard the interests of all stakeholders, particularly the minority shareholders; 
(6)  balance the conflicting interest of the stakeholders; 
(7)  determine appropriate levels of remuneration of executive directors, key managerial personnel and 
senior management and have a prime role in appointing and where necessary recommend removal 
of executive directors, key managerial personnel and senior management; 

(8)  moderate and arbitrate in the interest of the company as a whole, in situations of conflict between 

management and shareholder’s interest. 

III. Duties : 

The independent directors shall— 

(1)  undertake  appropriate  induction  and  regularly  update  and  refresh  their  skills,  knowledge  and 

familiarity with the company; 

358 

 
(2)  seek appropriate clarification or amplification of information and, where necessary, take and follow 
appropriate professional advice and opinion of outside experts at the expense of the company; 
(3)  strive to attend all meetings of the Board of Directors and of the Board committees of which he is 

a member; 

(4)  participate  constructively  and  actively  in  the  committees  of  the  Board  in  which  they  are 

chairpersons or members; 

(5)  strive to attend the general meetings of the company; 
(6)  where they have concerns about the running of the company or a proposed action, ensure that these 
are addressed by the Board and, to the extent that they are not resolved, insist that their concerns 
are recorded in the minutes of the Board meeting; 

(7)  keep  themselves  well  informed  about  the  company  and  the  external  environment  in  which  it 

operates; 

(8)  not to unfairly obstruct the functioning of an otherwise proper Board or committee of the Board; 
(9)  pay sufficient attention and ensure that adequate deliberations are held before approving related 

party transactions and assure themselves that the same are in the interest of the company; 

(10)  ascertain and ensure that the company has an adequate and functional vigil mechanism and to 
ensure that the interests of a person who uses such mechanism are not prejudicially affected on 
account of such use; 

(11)  report concerns about unethical behavior, actual or suspected fraud or violation of the company’s 

code of conduct or ethics policy; 

(12)  1[act  within  their  authority],  assist  in  protecting  the  legitimate  interests  of  the  company, 

shareholders and its employees; 

(13)  not disclose confidential information, including commercial secrets, technologies, advertising and 
sales promotion plans, unpublished price sensitive information, unless such disclosure is expressly 
approved by the Board or required by law. 

IV. Manner of appointment: 

(1)  Appointment process of independent directors shall be independent of the company management; 
while selecting independent directors the Board shall ensure that there is appropriate balance of 
skills, experience and knowledge in the Board so as to enable the Board to discharge its functions 
and duties effectively. 

(2)  The appointment of independent director(s) of the company shall be approved at the meeting of the 

shareholders. 

(3)  The explanatory statement attached to the notice of the meeting for approving the appointment of 
independent director shall include a statement that in the opinion of the Board, the independent 
director proposed to be appointed fulfils the conditions specified in the Act and the rules made 
thereunder and that the proposed director is independent of the management. 

(4)  The  appointment  of  independent  directors  shall  be  formalised  through  a  letter  of  appointment, 

which shall set out : 
(a) the term of appointment; 
(b) the expectation of the Board from the appointed director; the Board-level committee(s) in which 

the director is expected to serve and its tasks; 

(c) the fiduciary duties that come with such an appointment along with accompanying liabilities; 
(d) provision for Directors and Officers (D and O) insurance, if any; 
(e) the Code of Business Ethics that the company expects its directors and employees to follow; 
(f) the list of actions that a director should not do while functioning as such in the company; and 

1. Subs. by  Notification No. S.O. 2113(E), dated 5th July 2017, for “ acting within his authority” . 

359 

 
                                                           
(g) the remuneration, mentioning periodic fees, reimbursement of expenses for participation in the 

Boards and other meetings and profit related commission, if any. 

(5)  The terms and conditions of appointment of independent directors shall be open for inspection at 

the registered office of the company by any member during normal business hours. 

(6)  The  terms  and  conditions  of  appointment  of  independent  directors  shall  also  be  posted  on  the 

company’s website. 

V. Re-appointment: 

The re-appointment of independent director shall be on the basis of report of performance evaluation. 

VI. Resignation or removal: 

(1)  The resignation or removal of an independent director shall be in the same manner as is provided 

in sections 168 and 169 of the Act. 

(2)  An  independent  director  who  resigns  or  is  removed  from  the  Board  of  the  company  shall  be 
replaced by a new independent director within 1[three months] from the date of such resignation or 
removal, as the case may be. 

(3)  Where  the  company  fulfils  the  requirement  of  independent  directors  in  its  Board  even  without 
filling the vacancy created by such resignation or removal, as the case may be, the requirement of 
replacement by a new independent director shall not apply. 

VII. Separate meetings: 

(1)  The independent directors of the company shall hold at least one meeting  2[in a financial year], 

without the attendance of non-independent directors and members of management; 
(2)  All the independent directors of the company shall strive to be present at such meeting; 
(3)  The meeting shall: 

(a)  review the performance of non-independent directors and the Board as a whole; 
(b)  review the performance of the Chairperson of the company, taking into account the views of 

executive directors and non-executive directors; 

(c)  assess  the  quality,  quantity  and  timeliness  of  flow  of  information  between  the  company 
management  and  the  Board  that  is  necessary  for  the  Board  to  effectively  and  reasonably 
perform their duties. 

VIII. Evaluation mechanism: 

(1)  The performance evaluation of independent directors shall be done by the entire Board of Directors, 

excluding the director being evaluated. 

(2)  On the basis of the report of performance evaluation, it shall be determined whether to extend or 

continue the term of appointment of the independent director. 

3[Note: The Provisions of sub-paragraph (2) and (7) of paragraph II, paragraph IV, paragraph V, clauses 
(a)  and  (b)  of  sub-paragraph  (3)  of  paragraph  VI  and  paragraph  VIII  shall  not  apply  in  the  case  of  a 
Government company as defined under clause (45) of section 2 of the Companies Act, 2013 (18 of 2013), 
if  the  requirements  in  respect  of  matters  specified  in  these  paragraph  are  specified  by  the  concerned 
Ministries or Departments of the Central Government or as the case may be, the State Governments and 
such requirements are complied with by the Government companies.] 

1. Subs. by Notification No. S.O. 2113(E), dated 5th July 2017, for “a period of not more than one hundred and eight days” 

(w.e.f. 5-7-2017). 

2. Subs. by ibid., for “in a year” (w.e.f. 5-7-2017). 
3. Ins. by ibid.(w.e.f. 5-7-2017). 

360 

 
 
 
                                                           
SCHEDULE V 

(See sections 196 and 197) 

PART I 

CONDITIONS TO BE FULFILLED FOR THE APPOINTMENT OF A MANAGING OR            

WHOLE-TIME DIRECTOR OR A MANAGER WITHOUT THE APPROVAL OF THE CENTRAL 
GOVERNMENT APPOINTMENTS 

No  person  shall  be  eligible  for  appointment  as  a  managing  or  whole-time  director  or  a  manager 
(hereinafter referred to as managerial person) of a company unless he satisfies the following conditions, 
namely:— 

(a) he had not been sentenced to imprisonment for any period, or to a fine exceeding one thousand 

rupees, for the conviction of an offence under any of the following Acts, namely:— 

(i) the Indian Stamp Act, 1899 (2 of 1899); 

(ii) the Central Excise Act, 1944 (1 of 1944); 

(iii) the Industries (Development and Regulation) Act, 1951 (65 of 1951); 

(iv) the Prevention of Food Adulteration Act, 1954 (37 of 1954); 

(v) the Essential Commodities Act, 1955 (10 of 1955); 

1[(vi) the Companies Act, 2013 (18 of 2013) or any previous company law;] 

(vii) the Securities Contracts (Regulation) Act, 1956 (42 of 1956); 

(viii) the Wealth-tax Act, 1957 (27 of 1957); 

(ix) the Income-tax Act, 1961 (43 of 1961); 

(x) the Customs Act, 1962 (52 of 1962); 

(xi) the Competition Act, 2002 (12 of 2003); 

(xii) the Foreign Exchange Management Act, 1999 (42 of 1999); 

(xiii) the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986); 

(xiv) the Securities and Exchange Board of India Act, 1992 (15 of 1992); 

(xv) the Foreign Trade (Development and Regulation) Act, 1922 (22 of 1922); 

(xvi) the Prevention of Money-Laundering Act, 2002 (15 of 2003); 

2[(xvii) the Insolvency and Bankruptcy Code, 2016 (31 of 2016); 

(xviii) the Goods and Services Tax Act, 2017 (12 of 2017); 

(xix) the Fugitive Economic Offenders Act, 2018 (17 of 2018).] 

(b)  he  had  not  been  detained  for  any  period  under  the  Conservation  of  Foreign  Exchange  and 

Prevention of Smuggling Activities Act, 1974 (52 of 1974): 

Provided that where the Central Government has given its approval to the appointment of a person 
convicted or detained under sub-paragraph (a) or sub-paragraph (b), as the case may be, no further approval 
of the Central Government shall be necessary for the subsequent appointment of that person if he had not 
been so convicted or detained subsequent to such approval. 

(c) he has completed the age of twenty-one years and has not attained the age of seventy years: 

1. Subs. by Notification No. G.S.R. 2922(E), dated 12th September, 2016, for sub-paragraph (vi). 
2. Ins. by Notification No. S.O. 4822(E), dated 12th September, 2018 (w.e.f. 12-9-2018). 

361 

 
                                                           
Provided that where he has attained the age of seventy years; and where his appointment is approved 
by  a  special  resolution  passed  by  the  company  in  general  meeting,  no  further  approval  of  the  Central 
Government shall be necessary for such appointment; 

(d) where he is a managerial person in more than one company, he draws remuneration from one 

or more companies subject to the ceiling provided in section V of Part II; 

(e) he is resident of India. 

Explanation I.—For the purpose of this Schedule, resident in India includes a person who has been 
staying in India for a continuous period of not less than twelve months immediately preceding the date 
of his appointment as a managerial person and who has come to stay in India,— 

(i) for taking up employment in India; or 
(ii) for carrying on a business or vacation in India. 

Explanation II.—This condition shall not apply to the companies in Special Economic Zones as 

notified by Department of Commerce from time to time: 

Provided that a person, being a non-resident in India shall enter India only after obtaining a proper 
Employment Visa from the concerned Indian mission abroad. For this purpose, such person shall be 
required to furnish, along with the visa application form, profile of the company, the principal employer 
and terms and conditions of such person’s appointment. 

PART II 
REMUNERATION 

Section I.— Remuneration payable by companies having profits: 

Subject  to  the  provisions  of  section  197,  a  company  having  profits  in  a  financial  year  may  pay 
remuneration to a managerial person or persons  1[or other director or directors] not exceeding the limits 
specified in such section. 
2[Section II.— Remuneration payable by companies having no profit or inadequate profit 3***: 

Where in any financial year during the currency of tenure of a managerial person 1[or other director], a 
company has no profits or its profits are inadequate, it may, 3***, pay remuneration to the managerial person 
1[or other director] not exceeding the limits under (A) and (B) given below:— 

4[(A): 

(1) 

SI. No.  Where  the  effective  capital  (in 

rupees) is 

(2) 
Limit  of  yearly  remuneration  payable 
shall not exceed (in Rupees) in case of a 
managerial person 

(i) 

(ii) 

(iii) 

(iv) 

less 

than  5 

Negative  or 
crores. 
5 crores and above but less than 100 
crores. 
100 crores and above but less than 
250 crores. 
250 crores and above. 

60 lakhs 

84 lakhs 

120 lakhs 

120  lakhs  plus  0.01%  of  the  effective 
capital in excess of Rs. 250 crores: 

24 Lakhs plus 0.01% of the 
effective capital in excess of 
Rs. 250 crores:] 

5[Provided that the remuneration in excess of above limits may be paid] if the resolution passed 

by the shareholders is a special resolution.  

1. Ins. by Notification No. S.O. 1256(E), dated 18th March, 2021 (w.e.f. 18-3-2021). 
2. Subs. by Notification No. S.O. 2922(E), dated 12th September 2016, for Section II. 
3. The words “without Central Government approval” omitted by Notification No. S.O. 4822(E), dated 12th September, 2018 

(w.e.f. 12-9-2018). 

4. Subs. by Notification No. S.O. 1256(E), for Table (A) dated 18th March, 2021 (w.e.f. 18-3-2021). 
5. Subs. by Notification No. S.O. 4822(E), for “Provided that the above limits shall be doubled” (w.e.f. 12-9-2018). 

362 

(3) 
yearly 
Limit 
of 
remuneration 
payable 
shall not exceed (in rupees) 
in case of other director 
12 Lakhs 

17 Lakhs 

24 Lakhs 

 
 
 
                                                           
Explanation.— It is hereby clarified that for a period less than one year, the limits shall be pro-rated. 

(B)  In case of a managerial person who is functioning in a professional capacity,  1[remuneration as 
per  item  (A)  may  be  paid],  if  such  managerial  person  is  not  having  any  interest  in  the  capital  of  the 
company  or  its  holding  company  or  any  of  its subsidiaries directly  or  indirectly  or  through  any  other 
statutory structures and not having any direct or indirect interest or related to the directors or promoters 
of the company or its holding company or any of its subsidiaries at any time during the last two years 
before or on or after the date of appointment and possesses graduate level qualification with expertise and 
specialised knowledge in the field in which the company operates: 

Provided that any employee of a company holding shares of the company not exceeding 0.5% of its paid up share 
capital under any scheme formulated for allotment of shares to such employees including Employees Stock Option 
Plan or by way of qualification shall be deemed to be a person not having any interest in the capital of the company: 

Provided further that the limits specified under items (A) and (B) of this section shall apply, if-  

(i) 

(ii) 

(iii) 

payment of remuneration is approved by a resolution passed by the Board and, in the case of a 
company  covered  under  sub-section  (1)  of  section  178  also  by  the  Nomination  and 
Remuneration Committee; 

2[the  company  has  not  committed  any  default  in  payment  of  dues  to  any  bank  or  public  financial 
institution or non-convertible debenture holders or any other secured creditor, and in case of default, 
the  prior  approval  of  the  bank  or  public  financial  institution  concerned  or  the  non-convertible 
debenture holders or other secured creditor, as the case  may be, shall be obtained by the company 
before obtaining the approval in the general meeting;] 

an ordinary resolution or a special resolution, as the case may be, has been passed for payment 
of  remuneration  as  per  3***  item  (A)  or  a  special  resolution  has  been  passed  for  payment  of 
remuneration as per item (B), at the general meeting of the company for a period not exceeding 
three years. 

(iv) 

a statement along with a notice calling the general meeting referred to in clause (iii) is given to 
the shareholders containing the following information, namely:-  

I.  General information: 

(1)  Nature of industry 

(2)  Date or expected date of commencement of commercial production 

(3)  In case of new companies, expected date of commencement of activities as per project approved 

by financial institutions appearing in the prospectus 

(4)  Financial performance based on given indicators 

(5)  Foreign investments or collaborations, if any. 

II. Information about the appointee: 

(1)  Background details 

(2)  Past remuneration 

(3)  Recognition or awards 

(4)  Job profile and his suitability 

(5)   Remuneration proposed 

(6)   Comparative remuneration profile with respect to industry, size of the company, profile of the 
position and person (in case of expatriates the relevant details would be with respect to the country of 
his origin) 

(7)  Pecuniary relationship directly or indirectly with the company, or relationship with the managerial 
personnel, if any. 

1. Subs. by Notification No. S.O. 4822(E), dated 12th September, 2018, for “no approval of Central Government is required” 

(w.e.f. 12-9-2018). 

2. Subs. by ibid., for  clause (ii) (w.e.f. 12-9-2018). 
3. The words “the limits laid down in” omitted by ibid., (w.e..f 12-9-2018). 

363 

 
                                                           
III. Other information: 

(1)  Reasons of loss or inadequate profits 

(2)  Steps taken or proposed to be taken for improvement 

(3)  Expected increase in productivity and profits in measurable terms 

IV. Disclosures: 

The following disclosures shall be mentioned in the Board of Director’s report under the heading “Corporate 
Governance”, if any, attached to the financial statement: 

(i) 

all elements of remuneration package such as salary, benefits, bonuses, stock options, pension, etc., of all 
the directors; 

(ii)  details of fixed component and performance linked incentives along with the performance criteria; 

(iii)  service contracts, notice period, severance fees; and 

(iv)  stock option details, if any, and whether the same has been issued at a discount as well as the period over 

which accrued and over which exercisable. 

Explanation: For the purposes of Section II of this part, “Statutory Structure” means any entity which is entitled 
to hold shares in any company formed under any statute. ] 

Section  III.—  Remuneration  payable  by  companies  having  no  profit  or  inadequate  1***profit  in 
certain special circumstances: 

In the following circumstances a company may,  1***, pay remuneration to a managerial person  2[or 

other director] in excess of the amounts provided in Section II above:— 

(a) where the remuneration in excess of the limits specified in Section I or Section II is paid by any 
other company and that other company is either a foreign company or has got the approval of its 
shareholders  in  general  meeting  to  make  such  payment,  and  treats  this  amount  as  managerial 
remuneration for the purpose of section 197 and the total managerial remuneration payable by such 
other company to its managerial persons including such amount or amounts is within permissible 
limits under section 197. 

3[(b) where the company— 

(i)  is  a  newly  incorporated  company,  for  a  period  of  seven  years  from  the  date  of  its 

incorporation, or 

(ii) is a sick company, for whom a scheme of revival or rehabilitation has been ordered by the 
Board  for  Industrial  and  Financial  Reconstruction  for  a  period  of  five  years  from  the  date  of 
sanction of scheme of revival, or  

(iii) is a company in relation to which a resolution plan has been approved by the National 
Company Law Tribunal under the Insolvency and Bankruptcy Code, 2016 (31 of 2016) for a period 
of five years from the date of such approval,  

it may pay 4[any remuneration to its managerial persons  2[or other directors]].] 

(c) where remuneration of a managerial person 2[or other director] exceeds the limits in Section II but 
the remuneration has been fixed by the Board for Industrial and Financial Reconstruction or the 
National Company Law Tribunal: 

Provided  that the limits  under  this  Section shall  be  applicable  subject to  meeting  all  the conditions 

specified under Section II and the following additional conditions:— 

1. The words “without Central Government approval” omitted by Notification No. S.O. 4822(E), dated 12th September, 2018 

(w.e.f. 12-9-2018). 

2. Ins. by Notification No. S.O. 1256(E), dated 18th March, 2021 (w.e.f. 18-3-2021). 
3. Subs. by Act 31 of 2016, s. 255 and the Eleventh Schedule, for clause (b) (w.e.f. 15-11-2016). 
4. Subs. by Notification No. S.O. 4822(E), dated 12th September, 2018, for “remuneration up to two times the amount permissible 

under Section II” (w.e.f. 12-9-2018). 

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(i)  except  as  provided  in  para  (a)  of  this  Section,  the  managerial  person  is  not  receiving 

remuneration from any other company; 

(ii) the auditor or Company Secretary of the company or where the company has not appointed a 
Secretary,  a  Secretary  in  whole-time  practice,  certifies  that  all  secured  creditors  and  term 
lenders have stated in writing that they have no objection for the appointment of the managerial 
person 1[or other director] as well as the quantum of remuneration and such certificate is filed 
along with the return as prescribed under sub-section (4) of section 196. 

(iii)  the  auditor  or  Company  Secretary  or  where  the  company  has  not  appointed  a  secretary,  a 
secretary in whole-time practice certifies that there is no default on payments to any creditors, 
and all dues to deposit holders are being settled on time. 

2* 
1[Explanation.-For the purposes of Section I, Section II and Section III, the term “or other director” 

* 

* 

* 

* 

shall mean a non-executive director or an independent director.] 

Section IV.— Perquisites not included in managerial remuneration: 

1. A managerial person shall be eligible for the following perquisites which shall not be included in the 

computation of the ceiling on remuneration specified in Section II and Section III:— 

(a) contribution to provident fund, superannuation fund or annuity fund to the extent these either singly 

or put together are not taxable under the Income-tax Act, 1961(43 of 1961); 

(b) gratuity payable at a rate not exceeding half a month’s salary for each completed year of service; 

and 

(c) encashment of leave at the end of the tenure. 

2. In addition to the perquisites specified in paragraph 1 of this section, an expatriate managerial person 
(including a non-resident Indian) shall be eligible to the following perquisites which shall not be included 
in the computation of the ceiling on remuneration specified in Section II or Section III— 

(a) Children’s education allowance: In case of children studying in or outside India, an allowance 
limited to a maximum of Rs. 12,000 per month per child or actual expenses incurred, whichever is less. 
Such allowance is admissible up to a maximum of two children. 

(b) Holiday passage for children studying outside India or family staying abroad:  Return holiday 
passage  once  in  a  year  by  economy  class  or  once  in  two  years  by  first  class  to  children  and  to  the 
members of the family from the place of their study or stay abroad to India if they are not residing in 
India, with the managerial person. 

(c) Leave travel concession: Return passage for self and family in accordance with the rules specified 
by the company where it is proposed that the leave be spent in home country instead of anywhere in 
India. 

Explanation I.— For the purposes of Section II of this Part, “effective capital” means the aggregate 
of the paid-up share capital (excluding share application money or advances against shares); amount, if 
any, for the time being standing to the credit of share premium account; reserves and surplus (excluding 
revaluation reserve); long-term loans and deposits repayable after one year (excluding working capital 
loans,  overdrafts,  interest  due  on  loans  unless  funded,  bank  guarantee,  etc.,  and  other  short-term 
arrangements)  as  reduced  by  the  aggregate  of  any  investments  (except  in  case  of  investment  by  an 
investment  company  whose  principal  business  is  acquisition  of  shares,  stock,  debentures  or  other 
securities),accumulated losses and preliminary expenses not written off. 

Explanation II.— (a) Where the appointment of the managerial person is made in the year in which 
company  has  been  incorporated,  the  effective  capital  shall  be  calculated  as  on  the  date  of  such 
appointment; 

(b) In any other case the effective capital shall be calculated as on the last date of the financial year 

preceding the financial year in which the appointment of the managerial person is made. 

1. Ins. by Notification No. S.O. 1256(E), dated 18th March, 2021 (w.e.f. 18-3-2021). 
2. Clause (d) omitted by Notification No. S.O. 4822(E), dated 12th September, 2018 (w.e.f. 12-9-2018). 

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Explanation III.— For the purposes of this Schedule, “family” means the spouse, dependent children 

and dependent parents of the managerial person. 

Explanation IV.— The Nomination and Remuneration Committee while approving the remuneration 

under Section II or Section III, shall— 

(a)  take  into  account,  financial  position  of  the  company,  trend  in  the  industry,  appointee’s 

qualification, experience, past performance, past remuneration, etc.; 

(b)  be in  a  position to  bring  about  objectivity  in  determining  the  remuneration  package  while 

striking a balance between the interest of the company and the shareholders. 

Explanation V.— For the purposes of this Schedule, “negative effective capital” means the effective 
capital which is calculated in accordance with the provisions contained in Explanation I of this Part is 
less than zero. 

Explanation VI.— For the purposes of this Schedule:— 

1* 

* 

* 

* 

* 

(B)  “Remuneration”  means  remuneration  as  defined  in  clause  (78)  of  section  2  and  includes 

reimbursement of any direct taxes to the managerial person. 

Section V. —Remuneration payable to a managerial person in two companies: 

Subject to the provisions of sections I to IV, a managerial person shall draw remuneration from one or 
both companies, provided that the total remuneration drawn from the companies does not exceed the higher 
maximum limit admissible from any one of the companies of which he is a managerial person. 

PART III 

Provisions applicable to Parts I and II of this Schedule 

1. The appointment and remuneration referred to in Part I and Part II of this Schedule shall be subject 

to approval by a resolution of the shareholders in general meeting. 

2. The auditor or the Secretary of the company or where the company is not required to appointed a 
Secretary, a Secretary in whole-time practice shall certify that the requirement of this Schedule have been 
complied with and such certificate shall be incorporated in the return filed with the Registrar under sub-
section (4) of section 196. 

The Central Government may, by notification, exempt any class or classes of companies from any of 

the requirements contained in this Schedule. 

PART IV 

1. Clause (A) omitted by Notification No S.O. 4822(E), dated 12th September, 2018 (w.e.f. 12-9-2018). 

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SCHEDULE VI 

(See sections 55 and 186) 

The term “infrastructural projects” or “infrastructural facilities” includes the following projects 

or activities:— 

(1) Transportation (including inter modal transportation), includes the following:— 

(a) roads, national highways, state highways, major district roads, other district roads 
and  village  roads,  including  toll  roads,  bridges,  highways,  road  transport  providers  and 
other road-related services; 

(b)  rail  system,  rail  transport  providers,  metro  rail  roads  and  other  railway  related 

services; 

(c)  ports  (including  minor  ports  and  harbours),  inland  waterways,  coastal  shipping 

including shipping lines and other port related services; 

(d) aviation, including airports, heliports, airlines and other airport related services; 

(e) logistics services. 

(2) Agriculture, including the following, namely:— 

(a) infrastructure related to storage facilities; 

(b) construction relating to projects involving agro-processing and supply of inputs to 

agriculture; 

(c) construction for preservation and storage of processed agro-products, perishable 

goods such as fruits, vegetables and flowers including testing facilities for quality. 

(3) Water management, including the following, namely:— 

(a) water supply or distribution; 

(b) irrigation; 

(c) water treatment. 

(4) Telecommunication, including the following, namely:— 

(a) basic or cellular, including radio paging; 

(b) domestic satellite service (i.e., satellite owned and operated by an Indian company 

for providing telecommunication service); 

(c) network of trunking, broadband network and internet services. 

(5)  Industrial,  commercial  and  social  development  and  maintenance,  including  the 

following, namely:— 

(a) real estate development, including an industrial park or special economic zone; 

(b) tourism, including hotels, convention centres and entertainment centres; 

(c) public markets and buildings, trade fair, convention,  exhibition, cultural centres, 

sports and recreation infrastructure, public gardens and parks; 

(d) construction of educational institutions and hospitals; 

(e) other urban development, including solid waste management systems, sanitation 

and sewerage systems. 

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(6) Power, including the following:— 

(a) generation of power through thermal, hydro, nuclear, fossil fuel, wind and other 

renewable sources; 

(b)  transmission,  distribution  or  trading  of  power  by  laying  a  network  of  new 

transmission or distribution lines. 
(7) Petroleum and natural gas, including the following:— 

(a) exploration and production; 
(b) import terminals; 
(c) liquefaction and re-gasification; 
(d) storage terminals; 
(e) transmission networks and distribution networks including city gas infrastructure. 

(8) Housing, including the following:— 

(a) urban and rural housing including public / mass housing, slum rehabilitation, etc; 
(b)  other  allied  activities  such  as  drainage,  lighting,  laying  of  roads,  sanitation  and 

facilities. 
(9) Other miscellaneous facilities/services, including the following:— 

(a) mining and related activities; 
(b) technology related infrastructure; 
(c)  manufacturing  of  components  and  materials  or  any  other  utilities  or  facilities 

required by the infrastructure sector like energy saving devices and metering devices; 

(d) environment related infrastructure; 
(e) disaster management services; 
(f) preservation of monuments and icons; 
(g) emergency services (including medical, police, fire and rescue). 

(10) such other facility service as may be prescribed. 

368 

 
 
 
SCHEDULE VII 
(See section 135) 
Activities which may be included by companies in their Corporate Social Responsibility Policies 
Activities relating to:— 

1[(i) eradicating hunger, poverty and malnutrition,  2[promoting health care including preventive 
health]  and  sanitation  3[Including  contribution  to  the  Swatch  Bharat  Kosh  set-up  by  the  Central 
Government for the promotion of sanitation] and making available safe drinking water; 

(ii) promoting education, including special education and employment enhancing vocation skills 
especially  among  children,  women,  elderly,  and  the  differently  abled  and  livelihood  enhancement 
projects; 

(ii) 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 senior citizens and 
measures for reducing inequalities faced by socially and economically backward groups; 

(iv) 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 
4[including contribution to the Clean Ganga Fund set-up by the Central Government for rejuvenation 
of river Ganga]; 

(v) 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; 

(vi) measures for the benefit of armed forces veterans, war widows and their dependents; 
(vii) training to promote rural sports, nationally recognised sports, paralympic sports and Olympic 

sports; 

(viii)  contribution  to  the  Prime  Minister's  National  Relief  Fund  5[or  Prime  Minister’s  Citizen 
Assistance and Relief in Emergency Situations Fund (PM CARES Fund)] or any other fund set up by 
the  Central  Government  for  socio-economic  development  and  relief  and  welfare  of  the  Scheduled 
Castes, the Scheduled Tribes, other backward classes, minorities and women; 

6[(ix)(a) Contribution to incubators or research and development projects in the field of science, 
technology,  engineering  and  medicine,  funded  by  the  Central  Government  or  State  Government  or 
Public Sector Undertaking or any agency of the 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) and Council of Scientific and Industrial Research (CSIR), 
engaged in conducting research in science, technology, engineering and medicine aimed at promoting 
Sustainable Development Goals (SDGs)] 

 (x) rural development projects.] 
7[(xi) slum are development. 

1. Subs. by Notification No. G.S.R. 130(E), dated 27th February 2014, for item (i) to (x) (w.e.f. 1-4-2014). 
2. Subs. by Notification No. G.S.R. 261(E), dated 31st March 2014 for “promoting preventive health care” (w.e.f. 31-3-   

2014). 

3. Ins. by Notification No. G.S.R. 741(E), dated by 24th October, 2014 (w.e.f. 24-10-2014). 
4. Ins. by ibid. (w.e.f. 24-10-2014). 
5. Ins. by Notification No. G.S.R. 313(E), dated 26th May, 2020 (w.e.f. 28-03-2020). 
6. Subs. by Notification No. G.S.R. 525(E), dated 24th August, 2020 (w.e.f. 24-08-2020). 
7. Ins. by Notification No. G.S.R. 568(E), dated by 6th August 2016. 

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Explanation.— 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.] 

1[(xii) disaster management, including relief, rehabilitation and reconstruction activities.] 

1. Ins. by Notification No. G.S.R. 390(E), dated 30th May, 2019 (w.e.f. 30-5-2019). 

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