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 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)

(e) any other company governed by any special Act for the time being in force, except in so far as the said provisions are inconsistent with the provisions of such special Act; and

(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.

1. 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; subsection (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 subsection (7) of s. 105; ss. 108, 109 and 110; clause (b) of sub-section (1) of s. 113; s. 115; ss. 117 and 118; s. 119 [except subsection (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, 368 and 369; s. 370 (except the proviso); s. 371; s. 374; ss. 380 and 381; ss. 384 and 385; clause (a) of s. 386; ss. 387, 388, 389 and 390; sub-section (1) of s. 391; ss. 392 and 393; ss. 395, 396, 397 and 398; s. 399 [except reference of word Tribunal in sub-section (2)]; ss. 400, 401, 402, 403 and 404; s. 406; s. 442; ss. 454 and 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).

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.

Explanation.—For the purposes of this clause, ―significant influence‖ means control of at least twenty per cent. of total share capital, or of business decisions under an agreement;

(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

(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;

(23) ―Company Liquidator‖, in so far as it relates to the winding up of a company, means a person appointed by

(a) the Tribunal in case of winding up by the Tribunal; or

(b) the company or creditors in case of voluntary winding up,

as a Company Liquidator from a panel of professionals maintained by the Central Government under subsection (2) of section 275;

(24) ―company secretary‖ or ―secretary‖ means a company secretary as defined in clause (c) of subsection (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 paidup 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;

(28) ―cost accountant‖ means a cost accountant as defined in clause (b) of subsection (1) of section 2 of the Cost and Works Accountants Act, 1959 (23 of 1959)

(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;

(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;

(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:

Provided that on an application made by a company or body corporate, which is a holding company or a subsidiary of a company incorporated outside India and is required to follow a different financial year for consolidation of its accounts outside India, the Tribunal may, if it is satisfied, allow any period as its financial year, whether or not that period is a year:

Provided further 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;

(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;

(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;

(49) ―interested director‖ means a director who is in any way, whether by himself or through any of his relatives or firm, body corporate or other association of individuals in which he or any of his relatives is a partner, director or a member, interested in a contract or arrangement, or proposed contract or arrangement, entered into or to be entered into by or on behalf of a company;

(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; and
(v) 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;

(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.

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 and securities premium 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 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 359;

(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:

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 indirectly whether as a shareholder, 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 body corporate;

(71) ―public company‖ means a company which

(a) is not a private company;
(b) has a minimum paid-up share capital 1 *** 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 subsection (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; or

(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 is a member or director;
(v) a public company in which a director or manager is a director or 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;

(viii) any company which is

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

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

(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;

(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); Serious

(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 five crore rupees; or

(ii) turnover of which as per its last profit and loss account does not exceed two crore rupees or such higher amount as may be prescribed which shall not be more than twenty 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 total share capital either at its own or together with one or more of its subsidiary companies:

Provided that such class or classes of holding companies as may be prescribed shall not have layers of subsidiaries beyond such numbers as may be prescribed.

Explanation.—For the purposes of this clause,

(a) a company shall be deemed to be a subsidiary company of the holding company even if the control referred to in sub-clause (i) or sub-clause (ii) is of another subsidiary company of the holding company;

(b) the composition of a company‘s Board of Directors shall be deemed to be controlled by another company if that other company by exercise of some power exercisable by it at its discretion can appoint or remove all or a majority of the directors;

(c) the expression ―company‖ includes any body corporate;

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

(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;

(91) ―turnover‖ means the aggregate value of the realisation of amount made from the sale, supply or distribution of goods or on account of services rendered, or both, by the 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;

(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.

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 may be 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.

(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.

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

(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) (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 sixty days from the date of the application.

(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.

(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) an affidavit 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 subsection 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.

(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 subsection (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. Formulation 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.

(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 the Rehabilitation and Insolvency Fund formed under section 269.

(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 with imprisonment for a term which may extend to three years or with fine which shall not be less than twentyfive thousand rupees but which may extend to twenty-five lakh rupees, or with both:

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 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.

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, on and from the fifteenth day 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;

[(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

(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 within fifteen 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 subsection (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.

.

1. Subs. by Act 21 of 2015, s. 5, for cl. (b) (w.e.f. 29-5-2015).

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 subsections (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.

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

Provided further that any alteration having the effect of conversion of a public company into a private company shall not take effect except with the approval of the Tribunal which shall make such order as it may deem fit.

(2) Every alteration of the articles under this section and a copy of the order of the Tribunal 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, 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 period of six 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.

(3) If a company makes default in complying with any direction given under sub-section (1), the company shall be punishable with fine of one thousand rupees for every day during which the default continues and every officer who is in default shall be punishable with fine which shall not be less than five thousand rupees but which may extend to one lakh rupees.

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:

(a) the memorandum;

(b) the articles; and

(c) every agreement and every resolution referred to in sub-section (1) of section 117, 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.

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 an officer 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 1 [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:

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

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.

1. Subs. by Act 21 of 2015, s. 6, for ―under its common seal‖ (w.e.f. 29-5-2015).
2. Ins. by s. 6, ibid. (w.e.f. 29-5-2015).
3. 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).

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

(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 subsection (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 subsections (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

(a) state the following information, namely:

(i) names and addresses of the registered office of the company, company secretary, Chief Financial Officer, auditors, legal advisers, bankers, trustees, if any, underwriters and such other persons as may be prescribed;

(ii) dates of the opening and closing of the issue, and declaration about the issue of allotment letters and refunds within the prescribed time;

(iii) a statement by the Board of Directors about the separate bank account where all monies received out of the issue are to be transferred and disclosure of details of all monies including utilised and unutilised monies out of the previous issue in the prescribed manner;

(iv) details about underwriting of the issue;

(v) consent of the directors, auditors, bankers to the issue, expert‘s opinion, if any, and of such other persons, as may be prescribed;

(vi) the authority for the issue and the details of the resolution passed therefor;

(vii) procedure and time schedule for allotment and issue of securities;

(viii) capital structure of the company in the prescribed manner;

(ix) main objects of public offer, terms of the present issue and such other particulars as may be prescribed;

(x) main objects and present business of the company and its location, schedule of implementation of the project;

(xi) particulars relating to

(A) management perception of risk factors specific to the project;

(B) gestation period of the project;

(C) extent of progress made in the project;

(D) deadlines for completion of the project; and

(E) any litigation or legal action pending or taken by a Government Department or a statutory body during the last five years immediately preceding the year of the issue of prospectus against the promoter of the company

(xii) minimum subscription, amount payable by way of premium, issue of shares otherwise than on cash;

(xiii) details of directors including their appointments and remuneration, and such particulars of the nature and extent of their interests in the company as may be prescribed; and

(xiv) disclosures in such manner as may be prescribed about sources of promoter‘s contribution;

(b) set out the following reports for the purposes of the financial information, namely:—

(i) reports by the auditors of the company with respect to its profits and losses and assets and liabilities and such other matters as may be prescribed;

(ii) reports relating to profits and losses for each of the five financial years immediately preceding the financial year of the issue of prospectus including such reports of its subsidiaries and in such manner as may be prescribed:

Provided that in case of a company with respect to which a period of five years has not elapsed from the date of incorporation, the prospectus shall set out in such manner as may be prescribed, the reports relating to profits and losses for each of the financial years immediately preceding the financial year of the issue of prospectus including such reports of its subsidiaries;.

(iii) reports made in the prescribed manner by the auditors upon the profits and losses of the business of the company for each of the five financial years immediately preceding issue and assets and liabilities of its business on the last date to which the accounts of the business were made up, being a date not more than one hundred and eighty days before the issue of the prospectus:

Provided that in case of a company with respect to which a period of five years has not elapsed from the date of incorporation, the prospectus shall set out in the prescribed manner, the reports made by the auditors upon the profits and losses of the business of the company for all financial years from the date of its incorporation, and assets and liabilities of its business on the last date before the issue of prospectus; and

(iv) reports about the business or transaction to which the proceeds of the securities are to be applied directly or indirectly;

(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

(d) state such other matters and set out such other reports, as may be prescribed.

(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 registration, a copy thereof signed by every person who is named therein 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 registration 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 registration to the Registrar as required under subsection (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.

(7) The Registrar shall not register a prospectus unless the requirements of this section with respect to its registration are complied with and the prospectus is accompanied by the consent in writing of all the persons named in the prospectus.

(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 with imprisonment for a term which may extend to three years or with fine which shall not be less than fifty thousand rupees but which may extend to three lakh rupees, or with both.

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 public 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) 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 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 subsection (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 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.

(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 subsection (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

(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 subsection (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 officer of the company who is in default 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 three lakh rupees, or with both.

(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.

42. Offer or invitation for subscription of securities on private placement.—(1) Without prejudice to the provisions of section 26, a company may, subject to the provisions of this section, make private placement through issue of a private placement offer letter.

(2) Subject to sub-section (1), the offer of securities or invitation to subscribe securities, shall be made to such number of persons not exceeding fifty or such higher number as may be prescribed, [excluding qualified institutional buyers and employees of the company being offered securities under a scheme of employees stock option as per provisions of clause (b) of sub-section (1) of section 62], in a financial year and on such conditions (including the form and manner of private placement) as may be prescribed.

Explanation I.—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.

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

(i) "qualified institutional buyer‘‘ means the qualified institutional buyer as defined in the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirments) Regulations, 2009 as amended from time to time.

(ii) "private placement" means any offer of securities or invitation to subscribe securities to a select group of persons by a company (other than by way of public offer) through issue of a private placement offer letter and which satisfies the conditions specified in this section.

(3) 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.

(4) Any offer or invitation not in compliance with the provisions of this section shall be treated as a public offer and all 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 required to be complied with.

(5) All monies payable towards subscription of securities under this section shall be paid through cheque or demand draft or other banking channels but not by cash.

(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 date of completion of sixty days and if the company fails to repay the application money within the aforesaid period, it shall be liable to repay that money with interest at the rate of twelve per cent. per annum from the expiry of the sixtieth day:

Provided that monies received on application under this section shall be kept in a separate bank account in a scheduled bank and shall not be utilised for any purpose other than

(a) for adjustment against allotment of securities; or

(b) for the repayment of monies where the company is unable to allot securities.

(7) All offers covered under this section shall be made only to such persons whose names are recorded by the company prior to the invitation to subscribe, and that such persons shall receive the offer by name, and that a complete record of such offers shall be kept by the company in such manner as may be prescribed and complete information about such offer shall be filed with the Registrar within a period of thirty days of circulation of relevant private placement offer letter.

(8) No company offering 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 offer.

(9) Whenever a company makes any allotment of securities under this section, it shall file with the Registrar a return of allotment in such manner as may be prescribed, including the complete list of all security-holders, with their full names, addresses, number of securities allotted and such other relevant information as may be prescribed.

(10) 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 involved in the offer or invitation or two crore rupees, whichever is higher, and the company shall also refund all monies to subscribers within a period of thirty days of the order imposing the penalty.

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 shareholders 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;

(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 provisions of section 43 and sub-section (2) of section 50,

(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:

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.

1. Subs. by Act 21 of 2015, s. 7, for ―issued under the common seal of the company‖ (w.e.f. 29-5-2015).

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 may be, and may be made on behalf of the shareholders entitled to make the application by such one or more of their number as they may appoint in writing for the purpose.

(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.

(5) Where any default is made in complying with 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 six months or with fine which shall not be less than twentyfive thousand rupees but which may extend to five lakh rupees, or with both.

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.

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 discounted price shall be void.

(3) Where a company contravenes the provisions of 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 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 one lakh rupees but which may extend to five lakh rupees, or with both.

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;

(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;

(c) not less than one year has, at the date of such issue, elapsed since the date on which the company had commenced business; and

(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:

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 subsection (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.

(6) Where any default is made in complying with the provisions of sub-sections (1) to (5), 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 fine which shall not be less than ten thousand rupees but which may extend to one lakh 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 transferor 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 therefrom, 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, 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.

(5) If any default is made in complying with the order of the Tribunal under 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 punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than one lakh rupees but which may extend to three lakh rupees, or with both.

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

(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 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 disadvantageous to the shareholders 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 of a registered valuer subject to such conditions as may be prescribed.

(2) The notice referred to in sub-clause (i) of clause (a) of sub-section (1) shall be despatched through registered post or speed post or through electronic mode 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 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;

(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.
(2) If a company and any officer of the company who is in default contravenes the provisions of subsection (1), it or he shall be punishable with fine which may extend to one thousand rupees for each day 
during which such default continues, or five lakh rupees, whichever is less.

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.

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 paidup; 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 is 
unable, within the meaning of sub-section (2) of section 271, to pay 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.
(11) If a company fails to comply with the provisions of sub-section (4), it shall be punishable with 
fine which shall not be less than five lakh rupees but which may extend to twenty-five lakh rupees.

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 twentyfive lakh rupees.

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 buyback:
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 recognised 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 subsection (2).
(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 at least 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 with 
imprisonment for a term which may extend to three years or with fine which shall not be less than one 
lakh rupees but which may extend to three lakh rupees, or with both.
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 
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 repayment 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 insufficient 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 
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 forthwith on payment of principal and interest due thereon.
(11) If any default is made in complying with the order of the Tribunal under this section, every 
officer of the company who is in default shall be punishable with imprisonment for a term which may 
extend to three years or with fine which shall not be less than two lakh rupees but which may extend to 
five lakh rupees, or with both.
(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.

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 nonbanking 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;
(c) depositing such sum which shall not be less than fifteen per cent. of the amount of its deposits 
maturing during a financial year and the financial year next following, and kept in a scheduled bank 
in a separate bank account to be called as deposit repayment reserve account;
(d) providing such deposit insurance in such manner and to such extent as may be prescribed;
(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 such deposits; 
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 subsection (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
(b) repay within one year from such commencement or from the date on which such payments are 
due, whichever is earlier.
(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 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 subsection (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.

[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 section 73,—
(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 one crore rupees 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 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:
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.]

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:
Provided that the Registrar may, on an application by the company, allow such registration to be 
made within a period of three hundred days of such creation on payment of such additional fees as may be 
prescribed:
Provided further that if registration is not made within a period of three hundred days of such 
creation, the company shall seek extension of time in accordance with section 87:
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.
(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 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 register the charge within 
the period specified in 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.
(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 and the provisions of 
sub-section (1) of section 77 shall, as far as may be, apply to an intimation given under this section.
(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 therein 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.
(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.—If any company contravenes any provision of this Chapter, the 
company shall be punishable with fine which shall not be less than one lakh rupees but which may extend 
to ten 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 one lakh rupees, or with both.

87. Rectification by Central Government in register of charges.—(1) The Central Government on 
being satisfied that—
(i) (a) the omission to file with the Registrar the particulars of any charge created by a company 
or any charge subject to which any property has been acquired by a company or any modification of 
such charge; or
(b) the omission to register any charge within the time required under this Chapter or the 
omission to give intimation to the Registrar of the payment or the satisfaction of a charge, within the 
time required under this Chapter; or
(c) the omission or mis-statement of any particular with respect to any such charge or 
modification 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; or
(ii) on any other grounds, it is just and equitable to grant relief,
it may on the application of the company or any person interested and on such terms and conditions as it 
may seem to the Central Government just and expedient, direct that the time for the filing of the 
particulars or for the registration of the charge or for the giving of intimation of payment or satisfaction 
shall be extended or, as the case may require, that the omission or mis-statement shall be rectified.
(2) Where the Central Government extends the time for the registration of a charge, the order shall 
not prejudice any rights acquired in respect of the property concerned before the charge is actually 
registered.

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) If a company does not maintain a register of members or debenture-holders or other security 
holders or fails to maintain them in accordance with the provisions of sub-section (1) or sub-section (2), 
the company and every officer of the company who is in default shall be punishable with fine which shall 
not be less than fifty thousand rupees but which may extend to three lakh rupees and where the failure is a 
continuing one, with a further fine which may extend to one thousand rupees for every day, after the first 
during which the failure continues.

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 subsection (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.
(5) If any person fails, to make a declaration as required under sub-section (1) or sub-section (2) or 
sub-section (3), without any reasonable cause, he shall be punishable with fine which may extend to fifty 
thousand rupees and where the failure is a continuing one, with a further fine which may extend to one 
thousand rupees for every day after the first during which the failure continues.
(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, within the time specified under section 403.
(7) If a company, required to file a return under sub-section (6), fails to do so before the expiry of the 
time specified under the first proviso to sub-section (1) of section 403, the company and every officer of 
the company who is in default shall be punishable with fine which shall not be less than five hundred 
rupees but which may extend to one thousand rupees and where the failure is a continuing one, with a 
further fine which may extend to one thousand rupees for every day after the first during which the failure 
continues.
(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.

90. Investigation of beneficial ownership of shares in certain cases.—Where it appears to the 
Central Government that there are reasons so to do, it may appoint one or more competent persons to 
investigate and report as to beneficial ownership with regard to any share or class of shares and the 
provisions of section 216 shall, as far as may be, apply to such investigation as if it were an investigation 
ordered under that section.

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;
(c) its indebtedness;
(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 therein 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 indicating their names, addresses, countries of incorporation, registration and 
percentage of shareholding held by them; 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.
(2) The annual return, filed by a listed company or, by a company having such paid-up capital and 
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, within the time as specified, under section 403.
(5) If a company fails to file its annual return under sub-section (4), before the expiry of the period 
specified under section 403 with additional fees, the company shall be punishable with fine which shall 
not be less than fifty thousand rupees but which may extend to five lakhs 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 fifty thousand rupees but which may extend to five lakh 
rupees, or with both.
(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 punishable with fine which shall not 
be less than fifty thousand rupees but which may extend to five lakh rupees.

93. Return to be filed with Registrar in case promoters‘ stake changes.—Every listed company 
shall file a return in the prescribed form with the Registrar with respect to change in the number of shares 
held by promoters and top ten shareholders of such company, within fifteen days of such change.

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 and the Registrar has been 
given a copy of the proposed special resolution in advance:
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.
(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:
Provided that the Central Government may exempt any company from the provisions of this subsection 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
(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.
(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 may be 
prescribed:
Provided that a general meeting may be called after giving a shorter notice if consent is given in 
writing or by electronic mode by not less than ninety-five per cent. of the members entitled to vote at such 
meeting.
(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.
(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 subsection (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.
(5) If any default is made in complying with the provisions of this section, every promoter, director, 
manager or other key managerial personnel who is in default shall be punishable with fine which may 
extend to 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 more.
 

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.

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 be entitled to 
vote except on a poll:
Provided further that, unless the articles of a company otherwise provide, this subsection 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 punishable with fine which may extend to five thousand 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 who knowingly issues the invitations as aforesaid or wilfully authorises or permits their issue 
shall be punishable with fine which may extend to one lakh rupees:
Provided that an officer shall not be punishable under this sub-section by reason only of the issue to a 
member at his request in writing of a form of appointment naming the proxy, or of a list of persons 
willing to act as proxies, if the form or list is available on request in writing to every member entitled to 
vote at the meeting by proxy.
(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

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.
(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 subsection (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, —
(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 within the time specified under section 403:
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) If a company fails to file the resolution or the agreement under sub-section (1) before the expiry of 
the period specified under section 403 with additional fees, 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 and every 
officer of the company who is in default, including liquidator of the company, if any, shall be punishable
with fine which shall not be less than one lakh rupees but which may extend to five lakh 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;
(e) resolutions passed by a company according consent to the exercise by its Board of Directors 
of any of the powers under clause (a) and clause (c) of sub-section (1) of section 180;
(f) resolutions requiring a company to be wound up voluntarily passed in pursuance of section 
304;
(g) resolutions passed in pursuance of sub-section (3) of section 179: 1
***
1
[Provided that no person shall be entitled under section 399 to inspect or obtain copies of 
such resolutions; 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—
(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.,—
(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 subsection (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, within the time as specified, under section 403.
(3) If the company fails to file the report under sub-section (2) before the expiry of the period 
specified under section 403 with additional fees, 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 punishable with fine which shall not be less than twenty-five thousand 
rupees but which may extend to 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.

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 both; 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 
transferred by the company to the 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:
1
[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.
(3) The Board of Directors of a company may declare interim dividend during any financial year out 
of the surplus in the profit and loss account and out of profits of the financial year in which such interim 
dividend is sought to be declared:
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 the 
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 capitalization 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 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 subsection (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 subsection (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 which 1
[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.]
(7) If a company fails to comply with any of the requirements of this section, 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 and every officer of the company who is in default shall be punishable with fine which shall 
not be less than one lakh rupees but which may extend to five 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 subsection (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 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.
(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 subsection (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

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 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 in existence 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 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.

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 section 133 
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:
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.
(3) Where a company has one or more subsidiaries, 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 in the same form and manner as that of its own 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 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.
Explanation.—For the purposes of this sub-section, the word ―subsidiary‖ shall include associate 
company and joint venture.
(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.

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 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 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

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:
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 Natural 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.
(2) Notwithstanding anything contained in any other law for the time being in force, the National 
Financial Reporting Authority shall—
(a) make recommendations to the Central Government on the formulation and laying down of 
accounting and auditing policies and standards for adoption by companies or class of companies or 
their auditors, as the case may be;
(b) monitor and enforce the compliance with accounting standards and auditing standards in such 
manner as may be prescribed;
(c) oversee the quality of service of the professions associated with ensuring compliance with 
such standards, and suggest measures required for improvement in quality of service and such other 
related matters as may be prescribed; and
(d) perform such other functions relating to clauses (a), (b) and (c) as may be prescribed.
(3) The National Financial Reporting Authority shall consist of a chairperson, who shall be a person 
of eminence and having expertise in accountancy, auditing, finance or law to be appointed by the Central 
Government and such other members not exceeding fifteen consisting of part-time and full-time members 
as may be prescribed:
Provided that the terms and conditions and the manner of appointment of the chairperson and 
members shall be such as may be prescribed:
Provided further that the chairperson and members shall make a declaration to the Central 
Government in the prescribed form regarding no conflict of interest or lack of independence in respect of 
his or their appointment:
Provided also that the chairperson and members, who are in full-time employment with National 
Financial Reporting Authority shall not be associated with any audit firm (including related consultancy 
firms) during the course of their appointment and two years after ceasing to hold such appointment.
(4) Notwithstanding anything contained in any other law for the time being in force, the National 
Financial Reporting Authority shall—
(a) have the power to investigate, either suo motu or on a reference made to it by the Central 
Government, for such class of bodies corporate or persons, in such manner as may be prescribed into 
the matters of professional or other misconduct committed by any member or firm of chartered 
accountants, registered under the Chartered Accountants Act, 1949 ( 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 ten lakh rupees, but which may extend to ten times of the fees received, 
in case of firms;
(B) debarring the member or the firm from engaging himself or itself from practice as 
member of the Institute of Chartered Accountant of India referred to in clause (e) of sub-section 
(1) of section 2 of the Chartered Accountants Act, 1949 (38 of 1949) for a minimum period of six 
months or for such higher period not exceeding ten years as may be decided by the National 
Financial Reporting Authority.
Explanation.—For the purposes of 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 the Appellate Authority constituted under subsection (6) in such manner as may be prescribed.
(6) The Central Government may, by notification, constitute, with effect from such date as may be 
specified therein, an Appellate Authority consisting of a chairperson and not more then two other 
members, to be appointed by the Central Government, for hearing appeals arising out of the orders of the 
National Financial Reporting Authority.
(7) The qualifications for appointment of the chairperson and members of the Appellate Authority, 
the manner of selection, the terms and conditions of their service and the requirement of the supporting 
staff and procedure (including places of hearing the appeals, form and manner in which the appeals shall 
be filed) to be followed by the Appellate Authority shall be such as may be prescribed.
(8) The fee for filing the appeal shall be such as may be prescribed.
(9) The officer authorised by the Appellate Authority shall prepare in such form and at such time as 
may be prescribed its annual report giving a full account of its activities and forward a copy thereof to the 
Central Government and the Central Government shall cause the annual report to be laid before each 
House of Parliament.
(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.

134. Financial statement, Board‘s report, etc.— (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 at least 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 and the Chief Executive Officer, if he is a director 
in the company, the Chief Financial Officer and the company secretary of the company, wherever they are 
appointed, or in the case of a 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—
(a) the extract of the annual return as provided under sub-section (3) of section 92;
(b) number of meetings of the Board;
(c) Directors‘ Responsibility Statement;
1
[(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;
(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 on corporate 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 annual evaluation has been 
made by the Board of its own performance and that of its committees and individual directors;
(q) such other matters as may be prescribed.
(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 and other 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.
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).
(8) If a company contravenes 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 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
 

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 any 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.
(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 as 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, 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.
Explanation.—For the purposes of this section ―average net profit‖ shall be calculated in accordance 
with the provisions of section 198

136. Right of member to copies of audited financial statement.— (1) Without prejudice to the 
provisions of section 101, 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:
Provided 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 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:
Provided further 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 
financial statements, if any, and all other documents required to be attached thereto, on its website, which 
is maintained by or on behalf of the company:
Provided also that every company having a subsidiary or subsidiaries shall,—
(a) place separate audited accounts in respect of each of its subsidiary on its website, if any;
(b) provide a copy of separate audited financial statements in respect of each of its subsidiary, to 
any shareholder of the company who asks for it.
(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) 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 within the time specified 
under section 403:
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 within the time specified under section 403:
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:
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.
(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 within the time specified, 
under section 403.
(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 in section 403, the company shall be 
punishable with fine of one thousand rupees for every day during which the failure continues but which 
shall not be more than ten 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 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.
 

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.

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:
Provided that the company shall place the matter relating to such appointment for ratification by 
members at every annual general meeting:
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:
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 reappointment 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:
Provided also that every company, existing on or before the commencement of this Act which is 
required to comply with provisions of this sub-section, shall comply with the requirements of this subsection within 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.
(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, a retiring 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.
(3) If the auditor does not comply with sub-section (2), he or it shall be punishable with fine which 
shall not be less than fifty thousand rupees but which may extend to five 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 reappointed, 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 indirectly, 
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.
(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 of face 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;
(i) any person whose subsidiary or associate company or any other form of entity, is engaged as 
on the date of appointment in consulting and specialised services as provided in 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.

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 its subsidiaries in so far as it relates to the consolidation of its financial statements 
with that of its subsidiaries.
(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 subsection (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 with in 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;
(i) whether the company has adequate internal financial controls system 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) In the case of a Government company, 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 Government 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:
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
[(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 involving fraud is being or 
has been committed against the company by officers or employees of the company, he shall immediately 
report the matter to the Central Government within such time and 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 cost accountant in practice conducting cost audit under section 148; or
(b) the company secretary in practice conducting secretarial audit under section 204.
(15) If any auditor, cost accountant or company secretary in practice do not comply with the 
provisions of sub-section (12), he shall be punishable with fine which shall not be less than one lakh 
rupees but which may extend to twenty-five 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;
(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 with imprisonment for a term which may extend to one year or with fine 
which shall not be less than ten thousand rupees but which may extend to one lakh rupees, or with both.
(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:
Provided that if an auditor has contravened such provisions knowingly or wilfully 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 and with fine which shall not be less than one lakh 
rupees but which may extend to twenty-five lakh rupees.
(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
(ii) pay for damages to the company, statutory bodies or authorities or to any other persons 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 subsection (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 abetted 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.

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 Cost Accountant in practice 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 Institute of Cost and Works 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 cost accountant in 
practice to the Board of Directors of the company.
(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.
 

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).
(3) Every company shall have at least one director who has stayed in India for a total period of not 
less than one hundred and eighty-two days in the previous calendar year.
(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 a 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;
(c) who has or had no pecuniary relationship 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;
(d) none of whose relatives has or had pecuniary relationship or transaction with the company, its 
holding, subsidiary or associate company, or their promoters, or directors, amounting to two per cent. 
or more of its gross turnover or total income or fifty lakh rupees or such higher amount as may be 
prescribed, whichever is lower, during the two immediately preceding financial years or during the 
current financial year;
(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;
(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).
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.
(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 by 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.
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.
(4) Every person proposed to be appointed as a director by the company in general meeting or 
otherwise, shall furnish his Director Identification Number 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 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.

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.
(2) If a company fails to furnish Director Identification Number under sub-section (1), before the 
expiry of the period specified under section 403 with additional fee, the company shall be punishable with 
fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees 
and every officer of the company who is in default shall be punishable with fine which shall not be less 
than twenty-five thousand rupees but which may extend to 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.

159. Punishment for contravention.— If any individual or director of a company, contravenes any 
of the provisions of section 152, section 155 and section 156, such individual or director of the company 
shall be punishable with imprisonment for a term which may extend to six months or with fine which may 
extend to fifty 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 the contravention 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) 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, 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) In the case of a public company, 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:
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.
(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
(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):
Provided that the disqualifications referred to in clauses (d), (e) and (g) of sub-section (1) shall not 
take effect—
(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 off; 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 off.

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.
Explanation.— 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.
(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 subsection (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.
(6) If a person accepts an appointment as a director in contravention of sub-section (1), he shall be 
punishable with fine which shall not be less than five thousand rupees but which may extend to twentyfive thousand rupees for every day after the first during which the contravention continues.

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.
(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;
(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:
Provided that the office shall be vacated by the director even if he has filed an appeal against the 
order of such court;
(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.
(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 subsection (1), he shall be 
punishable with imprisonment for a term which may extend to one year or with fine which shall not be 
less than one lakh rupees but which may extend to five lakh rupees, or with both.
(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 director shall 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:
Provided 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),
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.

172. Punishment.— If a company contravenes any of the provisions of this Chapter and for which no
specific punishment is provided therein, the company and every officer of the company who is in default 
shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to 
five lakh rupees.

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 subsection 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.
(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.
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 actionsa 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 every listed 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
[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;]
(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 every listed 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:
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 shall carry out evaluation of every director‘s 
performance.
(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 subsection (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:
Provided that such policy 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 any time during a financial year shall 
constitute a Stakeholders Relationship Committee consisting of a chairperson who shall be a nonexecutive 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 punishable with imprisonment for a 
term which may extend to one year or with fine which shall not be less than twenty-five thousand rupees 
but which may extend to one lakh rupees, or with both:
Provided that non-consideration of resolution of 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:
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 withdrawable 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. Restriction 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:—
(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 paid-up share capital and free reserves, 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 withdrawable 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:
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:
Provided that the amount referred to in sub-section (1) or, as the case may be, the aggregate of the 
amount which may be so contributed by the company in any financial year shall not exceed seven and a 
half per cent. of its average net profits during the three immediately preceding financial years:
Provided further 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 and the 
acceptance 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 a political 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.
(3) Every company shall disclose in its profit and loss account any amount or amounts contributed by 
it to any political party during the financial year to which that account relates, giving particulars of the 
total amount contributed and the name of the party to which such amount has been contributed.
(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.

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 subsection (2), such 
director 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 one lakh rupees, or with both.
(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;
(b) shall apply to any contract or arrangement entered into or to be entered into between two 
companies where any of the directors of the one company 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.

185. Loan to directors, etc.— (1) Save as otherwise provided in this Act, no company shall, directly 
or indirectly, advance any loan, including any loan represented by a book debt, to any of its directors or to 
any other person in whom the director is interested or give any guarantee or provide any security in 
connection with any loan taken by him or such other person:
Provided that nothing contained in this sub-section 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 bank rate declared by the Reserve Bank of India;
1
[(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.]
Explanation.—For the purposes of this section, the expression ―to any other person in whom 
director is interested‖ means—
(a) any director of the lending company, or of a company which is its holding company or 
any partner or relative of any such director;
(b) any firm in which any such director or relative is a partner;
(c) any private company of which any such director is a director or member;
(d) 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
(e) 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.
(2) If any loan is advanced or a guarantee or security is given or provided in contravention of the 
provisions of sub-section (1), 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, and 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;
(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.
(3) Where the giving of any loan or guarantee or providing any security or the acquisition under subsection (2) exceeds the limits specified in that sub-section, prior approval by means of a special resolution 
passed at a general meeting shall be necessary.
(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.
(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.
(11) Nothing contained in this section, except sub-section (1), shall apply—
(a) to a loan made, guarantee given or security provided by a banking company or an insurance 
company or a housing finance company in the ordinary course of its business or a company engaged 
in the business of financing of companies or of providing infrastructural facilities;
(b) to any acquisition—
(i) made by a non-banking financial company registered under Chapter IIIB of the Reserve 
Bank of India Act, 1934 (2 of 1934) and whose principal business is acquisition of securities:
Provided that exemption to non-banking financial company shall be in respect of its 
investment and lending activities;
(ii) made by a company whose principal business is the acquisition of securities;
(iii) of shares allotted in pursuance of clause (a) of sub-section (1) of section 62.
(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;
(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—
(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 retransferred 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.
(4) 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 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 one lakh rupees, or with both.

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 a 1
[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:
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:
2
[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 shall be voidable at the option of the Board 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 authorised the contract 
or arrangement in violation of the provisions of this section shall,—
(i) in case of listed company, be punishable with imprisonment for a term which may extend to 
one year or with fine which shall not be less than twenty-five thousand rupees but which may extend 
to five lakh rupees, or with both; and
(ii) in case of any other company, be punishable with fine which shall not be less than twenty-five 
thousand rupees but which may extend to 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.
(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 directions.— (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 
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.
(5) 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 twenty-five thousand rupees but which may extend to 
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 subsection 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.— (1) No director of a company or any of its key managerial personnel shall buy in the 
company, or in its holding, subsidiary or associate company—
(a) a right to call for delivery or a right to make delivery at a specified price and within a 
specified time, of a specified number of relevant shares or a specified amount of relevant debentures; 
or
(b) a right, as he may elect, to call for delivery or to make delivery at a specified price and within 
a specified time, of a specified number of relevant shares or a specified amount of relevant 
debentures.
(2) If a director or any key managerial personnel of the company contravenes the provisions of subsection (1), such director or key managerial personnel shall be punishable with imprisonment for a term 
which may extend to two years or with fine which shall not be less than one lakh rupees but which may 
extend to five lakh rupees, or with both.
(3) Where a director or other key managerial personnel acquires any securities in contravention of 
sub-section (1), he shall, subject to the provisions contained in sub-section (2), be liable to surrender the 
same to the company and the company shall not register the securities so acquired in his name in the 
register, and if they are in dematerialised form, it shall inform the depository not to record such 
acquisition and such securities, in both the cases, shall continue to remain in the names of the transferors.
Explanation.—For the purposes of this section, ‗‗relevant shares‘‘ and ‗‗relevant debentures‘‘ mean 
shares and debentures of the company in which the concerned person is a whole-time director or other 
key managerial personnel or shares and debentures of its holding and subsidiary companies.

195. Prohibition on insider trading of securities.— (1) No person including any director or key 
managerial personnel of a company shall enter into insider trading:
Provided that nothing contained in this sub-section shall apply to any communication required in the 
ordinary course of business or profession or employment or under any law.
Explanation.—For the purposes of this section,—
(a) ―insider trading‖ means—
(i) an act of subscribing, buying, selling, dealing or agreeing to subscribe, buy, sell or deal in 
any securities by any director or key managerial personnel or any other officer of a company 
either as principal or agent if such director or key managerial personnel or any other officer of the 
company is reasonably expected to have access to any non-public price sensitive information in 
respect of securities of company; or
(ii) an act of counselling about procuring or communicating directly or indirectly any nonpublic price-sensitive information to any person;
(b) ―price-sensitive information‖ means any information which relates, directly or indirectly, to a 
company and which if published is likely to materially affect the price of securities of the company.
(2) If any person contravenes the provisions of this section, he shall be punishable with imprisonment 
for a term which may extend to five years or with fine which shall not be less than five lakh rupees but
which may extend to twenty-five crore rupees or three times the amount of profits made out of insider 
trading, whichever is higher, or with both

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;
(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 specified in 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, with the approval of the Central Government, 
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,—
(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;
(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.
(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, 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 and if it is not able to comply with such provisions, with 
the previous approval of the Central Government.
(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.
(7) Notwithstanding anything contained in any other provision of this Act but subject to the 
provisions of this section, an independent director shall not be entitled to any stock option and may 
receive remuneration by way of fees provided under sub-section (5), reimbursement of expenses for 
participation in the Board and other meetings and profit related commission as may be approved by the 
members.
(8) The net profits for the purposes of this section shall be computed in the manner referred to in 
section 198.
(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 the prior sanction of the Central Government, 
where it is required, he shall refund such sums to the company and until such sum is refunded, hold it in 
trust for the company.
(10) The company shall not waive the recovery of any sum refundable to it under sub-section (9) 
unless permitted by the Central Government.
(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 and if such conditions are not being complied, the approval of the Central 
Government had been obtained.
(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.
(15) If any person contravenes the provisions of this section, he shall be punishable with fine which 
shall not be less than one lakh rupees but which may extend to five lakh rupees.

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.
(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;
(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 in equity reserves 
including surplus in profit and loss account on measurement of the asset or the liability at fair value.
(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 which begins at or after the commencement of this Act, 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 subsection (4);
(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 in equity 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 restate 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 wholetime 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, the Central Government or 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, the Central Government or 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 this Chapter shall be in such form as may be prescribed.
(2) (a) Before any application is made by a company to the Central Government under any of the 
sections aforesaid, 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;
(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.
(5) If a company contravenes the provisions of 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 director 
and key managerial personnel of the company who is in default shall be punishable with fine which may
extend to fifty thousand rupees and where the contravention is a continuing one, with a further fine which 
may extend to one thousand rupees for every day after the first during which the contravention continues.

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 punishable with fine which shall not be less than one lakh rupees but 
which may extend to five 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.

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.
(3) If no information or explanation is furnished to the Registrar within the time specified under subsection (1) or if the Registrar on an examination of the documents furnished is of the opinion that the 
information or explanation furnished is inadequate 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 subsection:
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 every day 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
(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 subsection (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.
 

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 subsection (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 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 subsection 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) If the Director, Additional Director or 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) The Director, Additional Director or Assistant Director of Serious Fraud Investigation Office 
shall, immediately after arrest of such person under sub-section (8), 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 Judical 
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 Magistrate's court.
(11) The Central Government if so directs, the Serious Fraud Investigation Office shall submit an 
interim report to the Central Government.
(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.
(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
(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 subsection (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 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.

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 subsection (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—
(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 subsection (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 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.
(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 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) 1
[by the seal, if any] of the company whose affairs have been investigated; or
(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 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 subsection (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 
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 unauthorisedly 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.

COMPROMISES, ARRANGEMENTS AND AMALGAMATIONS
230. Power to compromise or make arrangements with creditors and members.— (1) Where a 
compromise or arrangement is proposed—
(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, 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 subsection (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 subsection (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:
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 threefourths 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 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.
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:
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 shares held 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 any share 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.
(8) If a transferor company or a transferee company contravenes the provisions of this section, the 
transferor company or the transferee company, as the case may be, 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 such transferor or transferee company who is in default, shall be punishable with imprisonment for a 
term which may extend to one year or with fine which shall not be less than one lakh rupees but which 
may extend to three lakh rupees, or with both.
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:
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 subsection (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 subsection (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 
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
(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 transferor company 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 transferor company 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 transferor company 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.
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 subregulation (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,—
(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 punishable with fine which shall not be less than twenty-five 
thousand rupees but which may extend to five 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.

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.

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 subsection 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;
(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.
(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 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 one lakh rupees, or with both.

243. Consequences 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 subsection (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.
(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), and every other director of the company who is 
knowingly a party to such contravention, shall be punishable with imprisonment for a term which may 
extend to six months or with fine which may extend to five lakh rupees, or with both.

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.
(2) Where any members of a company are entitled to make an application under subsection (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.
(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 subsection (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 and 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.

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 
a person having such qualifications and experience and registered as a valuer 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 during or after the valuation of assets.
(3) If a valuer contravenes the provisions of this section or the rules made thereunder, the valuer shall 
be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to 
one lakh 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.

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; 1
[or]
2
* * * * *
(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 section 455,
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.
(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
(e) is being wound up under Chapter XX, whether voluntarily or by the Tribunal.
(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.
 

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.

REVIVAL AND REHABILITATION OF SICK COMPANIES
253. Determination of sickness.— (1) Where on a demand by the secured creditors of a company 
representing fifty per cent. or more of its outstanding amount of debt, the company has failed to pay the 
debt within a period of thirty days of the service of the notice of demand or to secure or compound it to 
the reasonable satisfaction of the creditors, any secured creditor may file an application to the Tribunal in 
the prescribed manner along with the relevant evidence for such default, non-repayment or failure to offer 
security or compound it, for a determination that the company be declared as a sick company.
(2) The applicant under sub-section (1) may, along with an application under that subsection or at any 
stage of the proceedings thereafter, make an application for the stay of any proceeding for the winding up 
of the company or for execution, distress or the like against any property and assets of the company or for 
the appointment of a receiver in respect thereof and that no suit for the recovery of any money or for the 
enforcement of any security against the company shall lie or be proceeded with.
(3) The Tribunal may pass an order in respect of an application under sub-section (2) which shall be 
operative for a period of one hundred and twenty days.
(4) The company referred to in sub-section (1) may also file an application to the Tribunal on one or 
more of the grounds specified in sub-sections (1) and (2) above.
(5) Without prejudice to the provisions of sub-sections (1) to (4), the Central Government or the 
Reserve Bank of India or a State Government or a public financial institution or a State level institution or 
a scheduled bank may, if it has sufficient reasons to believe that any company has become, for the 
purposes of this Act, a sick company, make a reference in respect of such company to the Tribunal for 
determination of the measures which may be adopted with respect to such company:
Provided that a reference shall not be made under this sub-section in respect of any company by—
(a) the Government of any State unless all or any of the undertakings belonging to such company 
are situated in such State;
(b) a public financial institution or a State level institution or a scheduled bank unless it has, by 
reason of any financial assistance or obligation rendered by it, or undertaken by it, with respect to 
such company, an interest in such company.
(6) Where an application under sub-section (1) or sub-section (4) has been filed,—
(a) the company shall not dispose of or otherwise enter into any obligation with regard to, its 
properties or assets except as required in the normal course of business;
(b) the Board of Directors shall not take any steps likely to prejudice the interests of the creditors.
(7) The Tribunal shall, within a period of sixty days of the receipt of an application under sub-section 
(1) or sub-section (4), determine whether the company is a sick company or not:
Provided that no such determination shall be made in respect of an application under sub-section (1) 
unless the company has been given notice of the application and a reasonable opportunity to reply to the 
notice within thirty days of the receipt thereof.
(8) If the Tribunal is satisfied that a company has become a sick company, the Tribunal shall, after 
considering all the relevant facts and circumstances of the case, decide, as soon as may be, by an order in 
writing, whether it is practicable for the company to make the repayment of its debts referred to in subsection (1) within a reasonable time.
(9) If the Tribunal deems fit under sub-section (8) that it is practicable for a sick company to pay its 
debts referred to in that sub-section within a reasonable time, the Tribunal shall, by order in writing and 
subject to such restrictions or conditions as may be specified in the order, give such time to the company 
as it may deem fit to make repayment of the debt.

254. Application for revival and rehabilitation.— (1) On the determination of a company as a sick 
company by the Tribunal under section 253, any secured creditor of that company or the company may 
make an application to the Tribunal for the determination of the measures that may be adopted with 
respect to the revival and rehabilitation of such company:
Provided that in case any reference had been made before the Tribunal and a scheme for revival and 
rehabilitation submitted, such reference shall abate if the secured creditors representing three-fourths in 
value of the amount outstanding against financial assistance disbursed to the borrower have taken 
measures to recover their secured debt under sub-section (4) of section 13 of the Securitisation and 
Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002):
Provided further that no reference shall be made under this section if the secured creditors 
representing three-fourths in value of the amount outstanding against financial assistance disbursed to the 
borrower have taken measures to recover their secured debt under sub-section (4) of section 13 of the 
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 
of 2002):
Provided also that where the financial assets of the sick company had been acquired by any 
securitisation company or reconstruction company under sub-section (1) of section 5 of the Securitisation 
and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002), no 
such application shall be made without the consent of securitization company or reconstruction company 
which has acquired such assets.
(2) An application under sub-section (1) shall be accompanied by—
(a) audited financial statements of the company relating to the immediately preceding financial 
year;
(b) such particulars and documents, duly authenticated in such manner, along with such fees as 
may be prescribed; and
(c) a draft scheme of revival and rehabilitation of the company in such manner as may be 
prescribed:
Provided that where the sick company has no draft scheme of revival and rehabilitation to offer, it 
shall file a declaration to that effect along with the application.
(3) An application under sub-section (1) shall be made to the Tribunal within a period of sixty days 
from the date of determination of the company as a sick company by the Tribunal under section 253.

255. Exclusion of certain time in computing period of limitation.— Notwithstanding anything 
contained 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 for which an application has been made to the Tribunal under sub-section (1) of section 253, for 
a determination to be declared as a sick company or at any stage thereafter, the period during which the 
stay order as provided under sub-section (3) of section 253, was applicable shall be excluded.

256. Appointment of interim administrator.— (1) On the receipt of an application under section 
254, the Tribunal shall, not later than seven days from such receipt,—
(a) fix a date for hearing not later than ninety days from date of its receipt;
(b) appoint an interim administrator to convene a meeting of creditors of the company in 
accordance with the provisions of section 257 to be held not later than forty-five days from receipt of 
the order of the Tribunal appointing him to consider whether on the basis of the particulars and 
documents furnished with the application made under section 254, the draft scheme, if any, filed 
along with such application or otherwise and any other material available, it is possible to revive and 
rehabilitate the sick company and such other matters, which the interim administrator may consider
necessary for the purpose and to submit his report to the Tribunal within sixty days from the date of 
the order:
Provided that where no draft scheme is filed by the company and a declaration has been made to 
that effect by the Board of Directors, the Tribunal may direct the interim administrator to take over 
the management of the company; and
(c) issue such other directions to the interim administrator as the Tribunal may consider necessary 
to protect and preserve the assets of the sick company and for its proper management.
(2) Where an interim administrator has been directed to take over the management of the company, 
the directors and the management of the company shall extend all possible assistance and cooperation to 
the interim administrator to manage the affairs of the company.
 

257. Committee of creditors.— (1) The interim administrator shall appoint a committee of creditors 
with such number of members as he may determine, but not exceeding seven, and as far as possible a
representative each of every class of creditors should be represented in that committee.
(2) The holding of the meeting of the committee of creditors and the procedure to be followed at such 
meetings, including the appointment of its chairperson, shall be decided by the interim administrator.
(3) The interim administrator may direct any promoter, director or any key managerial personnel to 
attend any meeting of the committee of creditors and to furnish such information as may be considered 
necessary by the interim administrator.

258. Order of Tribunal.— On the date of hearing fixed by the Tribunal and on consideration of the 
report of the interim administrator filed under sub-section (1) of section 256, if the Tribunal is satisfied
that the creditors representing three-fourths in value of the amount outstanding against the sick company 
present and voting have resolved that—
(a) it is not possible to revive and rehabilitate such company, the Tribunal shall record such 
opinion and order that the proceedings for the winding up of the company be initiated; or
(b) by adopting certain measures the sick company may be revived and rehabilitated, the Tribunal 
shall appoint a company administrator for the company and cause such administrator to prepare a 
scheme of revival and rehabilitation of the sick company:
Provided that the Tribunal may, if it thinks fit, appoint an interim administrator as the company 
administrator.

259. Appointment of administrator.— (1) The interim administrator or the company administrator, 
as the case may be, shall be appointed by the Tribunal from a databank maintained by the Central 
Government or any institute or agency authorised by the Central Government in a manner as may be
prescribed consisting of the names of company secretaries, chartered accountants, cost accountants and 
such other professionals as may, by notification, be specified by the Central Government.
(2) The terms and conditions of the appointment of interim and company administrators shall be such 
as may be ordered by the Tribunal.
(3) The Tribunal may direct the company administrator to take over the assets or management of the 
company and for the purpose of assisting him in the management of the company, the company 
administrator may, with the approval of the Tribunal, engage the services of suitable expert or experts.

260. Powers and duties of company administrator.— (1) The company administrator shall perform 
such functions as the Tribunal may direct.
(2) Without prejudice to the provisions of sub-section (1), the company administrator may cause to be 
prepared with respect to the company—
(a) a complete inventory of—
(i) all assets and liabilities of whatever nature;
(ii) all books of account, registers, maps, plans, records, documents of title and all other 
documents of whatever nature;
(b) a list of shareholders and a list of creditors showing separately in the list of creditors, the 
secured creditors and unsecured creditors;
(c) a valuation report in respect of the shares and assets in order to arrive at the reserve price for 
the sale of any industrial undertaking of the company or for the fixation of the lease rent or share 
exchange ratio;
(d) an estimate of the reserve price, lease rent or share exchange ratio;
(e) proforma accounts of the company, where no up-to-date audited accounts are available; and
(f) a list of workmen of the company and their dues referred to in sub-section (3) of section 325.
 

261. Scheme of revival and rehabilitation.— (1) The company administrator shall prepare or cause 
to be prepared a scheme of revival and rehabilitation of the sick company after considering the draft 
scheme filed along with the application under section 254.
(2) A scheme prepared in relation to any sick company under sub-section (1) may provide for any one 
or more of the following measures, namely:—
(a) the financial reconstruction of the sick company;
(b) the proper management of the sick company by any change in, or by taking over, the 
management of such company;
(c) the amalgamation of—
(i) the sick company with any other company; or
(ii) any other company with the sick company;
(d) takeover of the sick company by a solvent company;
(e) the sale or lease of a part or whole of any asset or business of the sick company;
(f) the rationalisation of managerial personnel, supervisory staff and workmen in accordance with 
law;
(g) such other preventive, ameliorative and remedial measures as may be appropriate;
(h) repayment or rescheduling or restructuring of the debts or obligations of the sick company to 
any of its creditors or class of creditors;
(i) such incidental, consequential or supplemental measures as may be necessary or expedient in 
connection with or for the purposes of the measures specified in clauses (a) to (h).

262. Sanction of scheme.— (1) The scheme prepared by the company administrator under section 
261 shall be placed before the creditors of the sick company in a meeting convened for their approval by 
the company administrator within the period of sixty days from his appointment, which may be extended 
by the Tribunal up to a period not exceeding one hundred twenty days.
(2) The company administrator shall convene separate meetings of secured and unsecured creditors of 
the sick company and if the scheme is approved by the unsecured creditors representing one-fourth in 
value of the amount owed by the company to such creditors and the secured creditors, representing threefourths in value of the amount outstanding against financial assistance disbursed by such creditors to the 
sick company, the company administrator shall submit the scheme before the Tribunal for sanctioning the
scheme:
Provided that where the scheme relates to amalgamation of the sick company with any other 
company, such scheme shall, in addition to the approval of the creditors of the sick company under this 
sub-section, be laid before the general meeting of both the companies for approval by their respective 
shareholders and no such scheme shall be proceeded with unless it has been approved, with or without 
modification, by a special resolution passed by the shareholders of that company.
(3) (i) The scheme prepared by the company administrator shall be examined by the Tribunal and a 
copy of the scheme with modification, if any, made by the Tribunal shall be sent, in draft, to the sick 
company and the company administrator and in the case of amalgamation, also to any other company 
concerned, and the Tribunal may publish or cause to be published the draft scheme in brief in such daily 
newspapers as the Tribunal may consider necessary, for suggestions and objections, if any, within such 
period as the Tribunal may specify.
(ii) The complete draft scheme shall be kept at the place where registered office of the company is 
situated or at such places as mentioned in the advertisement.
(iii) The Tribunal may make such modifications, if any, in the draft scheme as it may consider 
necessary in the light of the suggestions and objections received from the sick company and the company
administrator and also from the transferee company and any other company concerned in the 
amalgamation and from any shareholder or any creditors or employees of such companies.
(4) On the receipt of the scheme under sub-section (3), the Tribunal shall within sixty days therefrom, 
after satisfying that the scheme had been validly approved in accordance with this section, pass an order 
sanctioning such scheme.
(5) Where a sanctioned scheme provides for the transfer of any property or liability of the sick 
company to any other company or person or where such scheme provides for the transfer of any property 
or liability of any other company or person in favour of the sick company, then, by virtue of, and to the 
extent provided in, the scheme, on and from the date of coming into operation of the sanctioned scheme 
or any provision thereof, the property shall be transferred to, and vest in, and the liability shall become the 
liability of, such other company or person or, as the case may be, the sick company.
(6) The Tribunal may review any sanctioned scheme and make such modifications, as it may deem 
fit, or may by order in writing direct company administrator, to prepare a fresh scheme providing for such 
measures as the company administrator may consider necessary.
(7) The sanction accorded by the Tribunal under sub-section (4) shall be conclusive evidence that all 
the requirements of the scheme relating to the reconstruction or amalgamation or any other measure 
specified therein have been complied with and a copy of the sanctioned scheme certified in writing by an 
officer of the Tribunal to be a true copy thereof shall in all legal proceedings be admitted as evidence.
(8) A copy of the sanctioned scheme referred to in sub-section (4) shall be filed with the Registrar by 
the sick company within a period of thirty days from the date of receipt of a copy thereof.

263. Scheme to be binding.— On and from the date of the coming into operation of the sanctioned 
scheme or any provision thereof, the scheme or such provision shall be binding on the sick company and 
the transferee company or, as the case may be, the other company and also on the employees, 
shareholders, creditors and guarantors of the said companies.

264. Implementation of scheme.— (1) The Tribunal shall, for the purpose of effective 
implementation of the scheme, have power to enforce, modify or terminate any contract or agreement or 
any obligation pursuant to such agreement or contract entered into by the company with any other person.
(2) The Tribunal may, if it deems necessary or expedient so to do, by order in writing, authorise the 
company administrator appointed under section 259 to implement a sanctioned scheme till its successful 
implementation on such terms and conditions as may be specified in the order and may for that purpose 
require him to file periodic reports on the implementation of the sanctioned scheme.
(3) Where the whole or substantial assets of the undertaking of the sick company are sold under a 
sanctioned scheme, the sale proceeds shall be applied towards implementation of the scheme in such 
manner as the Tribunal may direct:
Provided that debtors and creditors shall have the power to scrutinise and make an appeal for review 
of the value before final order of fixing value.
(4) Where it is difficult to implement the scheme for any reason or the scheme fails due to nonimplementation of obligations under the scheme by the parties concerned, the company administrator 
authorised to implement the scheme and where there is no such administrator, the company, the secured 
creditors, or the transferee company in a case of amalgamation, may make an application before the 
Tribunal for modification of the scheme or to declare the scheme as failed and that the company may be 
wound up.
(5) The Tribunal shall, within thirty days of presentation of an application under sub-section (4), pass 
an order for modification of the scheme or, as the case may be, declaring the scheme as failed and pass an 
order for the winding up of the company if three-fourths in value of the secured creditors consent to the 
modification of the scheme or winding up of the company.
(6) Where an application under sub-section (4) has been made before the Tribunal and such 
application is pending before it, such application shall abate, if the secured creditors representing not less 
than three-fourths in value of the amount outstanding against financial assistance disbursed to the sick
company have taken any measures to recover their secured debt under sub-section (4) of section 13 of the 
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 
of 2002)

265. Winding up of company on report of company administrator.— (1) If the scheme is not 
approved by the creditors in the manner specified in sub-section (2) of section 262, the company 
administrator shall submit a report to the Tribunal within fifteen days and the Tribunal shall order for the 
winding up of the sick company.
(2) On the passing of an order under sub-section (1), the Tribunal shall conduct the proceedings for 
winding up of the sick company in accordance with the provisions of Chapter XX.

266. Power of Tribunal to assess damages against delinquent directors, etc.— (1) If, in the course 
of the scrutiny or implementation of any scheme or proposal including the draft scheme or proposal, it 
appears to the Tribunal that any person who has taken part in the promotion, formation or management of 
the sick company or its undertaking, including any director, manager, officer or employee of the sick 
company who are or have been in employment of such company,—
(a) has misapplied or retained, or become liable or accountable for, any money or property of the 
sick company; or
(b) has been guilty of any misfeasance, malfeasance, non-feasance or breach of trust in relation to 
the sick company,
it may, by order, direct him to repay or restore the money or property, with or without interest, as it thinks 
just, or to contribute such sum to the assets of the sick company or the other person, entitled thereto by 
way of compensation in respect of the misapplication, retainer, misfeasance, malfeasance, non-feasance 
or breach of trust as the Tribunal thinks just and proper:
Provided that such direction by the Tribunal shall be without prejudice to any other legal action that 
may be taken against the person including any punishment for fraud in the manner as provided in section 
447.
(2) If the Tribunal is satisfied on the basis of the information and evidence in its possession with 
respect to any person who is or was a director or an officer or other employee of the sick company, that 
such person by himself or along with others had diverted the funds or other property of such company for 
any purpose other than the purposes of the company or had managed the affairs of the company in a 
manner highly detrimental to the interests of the company, the Tribunal shall, by order, direct the public 
financial institutions, scheduled banks and State level institutions not to provide, for a maximum period of 
ten years from the date of the order, any financial assistance to such person or any firm of which such 
person is a partner or any company or other body corporate of which such person is a director, by 
whatever name called, or to disqualify the said director, promoter, manager from being appointed as a 
director in any company registered under this Act for a maximum period of six years.
(3) No order shall be made by the Tribunal under this section against any person unless such person 
has been given a reasonable opportunity of being heard

267. Punishment for certain offences.— Whoever violates the provisions of this Chapter or any 
scheme, or any order, of the Tribunal or the Appellate Tribunal or makes a false statement or gives false 
evidence before the Tribunal or the Appellate Tribunal or attempts to tamper with the records of reference 
or appeal filed under this Act, he shall be punishable with imprisonment for a term which may extend to 
seven years and with fine which may extend to ten lakh rupees.

268. Bar of jurisdiction.— No appeal shall lie in any court or other authority and no civil court shall 
have any jurisdiction in respect of any matter in respect of which the Tribunal or the Appellate Tribunal is 
empowered by or under this Chapter and no injunction shall be granted by any court or other authority in 
respect of any action taken or proposed to be taken in pursuance of any power conferred by or under this 
Chapter.
 

269. Rehabilitation and insolvency fund.— (1) There shall be formed a Fund to be called the 
Rehabilitation and Insolvency Fund for the purposes of rehabilitation, revival and liquidation of the sick 
companies.
(2) There shall be credited to the Fund—
(a) the grants made by the Central Government for the purposes of the Fund;
(b) the amount deposited by the companies as contribution to the Fund;
(c) the amount given to the Fund from any other source; and
(d) the income from investment of the amount in the Fund.
(3) A company which has contributed any amount to the Fund shall, in the event of proceedings 
initiated in respect of such company under this Chapter or Chapter XX, may make an application to the 
Tribunal for withdrawal of funds not exceeding the amount contributed by it, for making payments to 
workmen, protecting the assets of the company or meeting the incidental costs during proceedings.
(4) The Fund shall be managed by an administrator to be appointed by the Central Government in 
such manner as may be prescribed.

270. Modes of winding up.— (1) The winding up of a company may be either—
(a) by the Tribunal; or
(b) voluntary.
(2) Notwithstanding anything contained in any other Act, the provisions of this Act with respect to 
winding up shall apply to the winding up of a company in any of the modes specified under sub-section 
(1).

PART I.—Winding up by the Tribunal
271. Circumstances in which company may be wound up by Tribunal.— (1) A company may, on 
a petition under section 272, be wound up by the Tribunal,—
(a) if the company is unable to pay its debts;
(b) if the company has, by special resolution, resolved that the company be wound up by the 
Tribunal;
(c) 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;
(d) if the Tribunal has ordered the winding up of the company under Chapter XIX;
(e) 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;
(f) 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
(g) if the Tribunal is of the opinion that it is just and equitable that the company should be wound 
up.
(2) A company shall be deemed to be unable to pay its debts,—
(a) if a creditor, by assignment or otherwise, to whom the company is indebted for an amount 
exceeding one lakh rupees then due, has served on the company, by causing it to be delivered at its 
registered office, by registered post or otherwise, a demand requiring the company to pay the amount 
so due and the company has failed to pay the sum within twenty-one days after the receipt of such 
demand or to provide adequate security or re-structure or compound the debt to the reasonable 
satisfaction of the creditor;
(b) if any execution or other process issued on a decree or order of any court or tribunal in favour 
of a creditor of the company is returned unsatisfied in whole or in part; or
(c) if it is proved to the satisfaction of the Tribunal that the company is unable to pay its debts, 
and, in determining whether a company is unable to pay its debts, the Tribunal shall take into account 
the contingent and prospective liabilities of the company.

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 creditor or creditors, including any contingent or prospective creditor or creditors;
(c) any contributory or contributories;
(d) all or any of the persons specified in clauses (a), (b) and (c) together;
(e) the Registrar;
(f) any person authorised by the Central Government in that behalf; or
(g) in a case falling under clause (c) of sub-section (1) of section 271, by the Central Government 
or a State Government.
(2) A secured creditor, the holder of any debentures, whether or not any trustee or trustees have been 
appointed in respect of such and other like debentures, and the trustee for the holders of debentures shall 
be deemed to be creditors within the meaning of clause (b) of sub-section (1).
(3) 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.
(4) The Registrar shall be entitled to present a petition for winding up under subsection (1) on any of 
the grounds specified in sub-section (1) of section 271, except on the grounds specified in clause (b), 
clause (d) or clause (g) of that sub-section:
Provided that the Registrar shall not present a petition on the ground that the company is unable to 
pay its debts unless it appears to him either from the financial condition of the company as disclosed in its 
balance sheet or from the report of an inspector appointed under section 210 that the company is unable to 
pay its debts:
Provided further that the Registrar shall obtain the previous sanction of the Central Government to the 
presentation of a petition:
Provided also that the Central Government shall not accord its sanction unless the company has been 
given a reasonable opportunity of making representations.
(5) 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.
(6) Before a petition for winding up of a company presented by a contingent or prospective creditor is 
admitted, the leave of the Tribunal shall be obtained for the admission of the petition and such leave shall 
not be granted, unless in the opinion of the Tribunal there is a prima facie case for the winding up of the 
company and until such security for costs has been given as the Tribunal thinks reasonable.
(7) 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:
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. Direction 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.
(2) The provisional liquidator or the Company Liquidator, as the case may be, shall be appointed 
from a panel maintained by the Central Government consisting of the names of chartered accountants, 
advocates, company secretaries, cost accountants or firms or bodies corporate having such chartered 
accountants, advocates, company secretaries, cost accountants and such other professionals as may be 
notified by the Central Government or from a firm or a body corporate of persons having a combination 
of such professionals as may be prescribed and having at least ten years‘ experience in company matters.
(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.
(4) The Central Government may remove the name of any person or firm or body corporate from the 
panel maintained under sub-section (2) on the grounds of misconduct, fraud, misfeasance, breach of 
duties or professional incompetence:
Provided that the Central Government before removing him or it from the panel shall give him or it a 
reasonable opportunity of being heard.
(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
(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.

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 scheme submitted under section 262;
(e) 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.

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.
(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.
(2) Where any person, without reasonable cause, fails to discharge his obligations under sub-section 
(1), he shall be punishable with imprisonment which may extend to six months or with fine which may 
extend to fifty thousand rupees, or with both.

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;
(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. — (1) The Tribunal may, at any 
time after making a winding up order, on an application of promoter, shareholders or creditors or any 
other interested person, if satisfied, make an order that it is just and fair that an opportunity to revive and 
rehabilitate the company be provided staying the proceedings for such time but not exceeding one 
hundred and eighty days and on such terms and conditions as it thinks fit:
Provided that an order under this sub-section shall be made by the Tribunal only when the application 
is accompanied with a scheme for rehabilitation.
(2) The Tribunal may, while passing the order under sub-section (1), require the applicant to furnish 
such security as to costs as it considers fit.
(3) Where an order under sub-section (1) is passed by the Tribunal, the provisions of Chapter XIX 
shall be followed in respect of the consideration and sanction of the scheme of revival of the company.
(4) Without prejudice to the provisions of sub-section (1), the Tribunal may at any time after making 
a winding up order, on an application of the Company Liquidator, make an order staying the winding up 
proceedings or any part thereof, for such time and on such terms and conditions as it thinks fit.
(5) The Tribunal may, before making an order, under this section, require the Company Liquidator to 
furnish to it a report with respect to any facts or matters which are in his opinion relevant to the 
application.
(6) A copy of every order made under this section shall forthwith be forwarded by the Company 
Liquidator to the Registrar who shall make an endorsement of the order in his books and records relating 
to the company

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 rateably 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 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
(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 setoff, 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.
(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.
(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.
(3) A copy of the order shall, within thirty days from the date thereof, be forwarded by the Company 
Liquidator to the Registrar who shall record in the register relating to the company a minute of the 
dissolution of the company.
(4) If the Company Liquidator makes a default in forwarding a copy of the order within the period 
specified in sub-section (3), the Company Liquidator shall be punishable with fine which may extend to 
five thousand rupees for every day during which the default continues.

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
304. Circumstances in which company may be wound up voluntarily.— A company may be 
wound up voluntarily,—
(a) if the company in general meeting passes a resolution requiring the company to be wound up 
voluntarily as a result of the expiry of the period for its duration, if any, fixed by its articles or on the 
occurrence of any event in respect of which the articles provide that the company should be 
dissolved; or
(b) if the company passes a special resolution that the company be wound up voluntarily.

305. Declaration of solvency in case of proposal to wind up voluntarily.— (1) Where it is 
proposed to wind up a company voluntarily, its director or directors, or in case the company has more 
than two directors, the majority of its directors, shall, at a meeting of the Board, make a declaration 
verified by an affidavit to the effect that they have made a full inquiry into the affairs of the company and 
they have formed an opinion that the company has no debt or whether it will be able to pay its debts in 
full from the proceeds of assets sold in voluntary winding up.
(2) A declaration made under sub-section (1) shall have no effect for the purposes of this Act, 
unless—
(a) it is made within five weeks immediately preceding the date of the passing of the resolution 
for winding up the company and it is delivered to the Registrar for registration before that date;
(b) it contains a declaration that the company is not being wound up to defraud any person or 
persons;
(c) it is accompanied by a copy of the report of the auditors of the company prepared in 
accordance with the provisions of this Act, on the profit and loss account of the company for the 
period commencing from the date up to which the last such account was prepared and ending with the 
latest practicable date immediately before the making of the declaration and the balance sheet of the 
company made out as on that date which would also contain a statement of the assets and liabilities of 
the company on that date; and
(d) where there are any assets of the company, it is accompanied by a report of the valuation of 
the assets of the company prepared by a registered valuer.
(3) Where the company is wound up in pursuance of a resolution passed within a period of five weeks 
after the making of the declaration, but its debts are not paid or provided for in full, it shall be presumed, 
until the contrary is shown, that the director or directors did not have reasonable grounds for his or their 
opinion under sub-section (1).
(4) Any director of a company making a declaration under this section without having reasonable 
grounds for the opinion that the company will be able to pay its debts in full from the proceeds of assets 
sold in voluntary winding up shall be punishable with imprisonment for a term which shall not be less 
than three years but which may extend to five years or with fine which shall not be less than fifty 
thousand rupees but which may extend to three lakh rupees, or with both

306. Meeting of creditors.— (1) The company shall along with the calling of meeting of the 
company at which the resolution for the voluntary winding up is to be proposed, cause a meeting of its 
creditors either on the same day or on the next day and shall cause a notice of such meeting to be sent by 
registered post to the creditors with the notice of the meeting of the company under section 304.
(2) The Board of Directors of the company shall—
(a) cause to be presented a full statement of the position of the affairs of the company together 
with a list of creditors of the company, if any, copy of declaration under section 305 and the estimated 
amount of the claims before such meeting; and
(b) appoint one of the directors to preside at the meeting.
(3) Where two-thirds in value of creditors of the company are of the opinion that—
(a) it is in the interest of all parties that the company be wound up voluntarily, the company shall 
be wound up voluntarily; or
(b) the company may not be able to pay for its debts in full from the proceeds of assets sold in 
voluntary winding up and pass a resolution that it shall be in the interest of all parties if the company 
is wound up by the Tribunal in accordance with the provisions of Part I of this Chapter, the company 
shall within fourteen days thereafter file an application before the Tribunal.
(4) The notice of any resolution passed at a meeting of creditors in pursuance of this section shall be 
given by the company to the Registrar within ten days of the passing thereof.
(5) If a company contravenes 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 two lakh rupees and the 
director 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 fifty thousand rupees but which may extend 
to two lakh rupees, or with both.

307. Publication of resolution to wind up voluntarily.— (1) Where a company has passed a 
resolution for voluntary winding up and a resolution under sub-section (3) of section 306 is passed, it 
shall within fourteen days of the passing of the resolution give notice of the resolution by advertisement 
in the Official Gazette and also in a newspaper which is in circulation in the district where the registered
office or the principal office of the company is situate.
(2) If a company contravenes the provisions of sub-section (1), the company and every officer of the 
company who is in default shall be punishable with fine which may extend to five thousand rupees for 
every day during which such default continues.