6th
NOV

Part IV Share capital and Debentures Nature, Numbering and Certificate of Shares

Posted by Rekha Prasad under Corporate Law

PART IV

SHARE CAPITAL AND DEBENTURES

Nature, Numbering and Certificate of Shares

82.        Nature of shares.

The shares or other interest of any member in a company shall be movable property, transferable in the manner provided by the articles of the company.

83.        Repealed by the Depositories Act, 1996 (22 of 1996) s.31 and Sch. (w.e.f. 20-9-1995).

84.        Certificate of shares.

1[(1)]     A certificate, under the common seal of the company, specifying any shares held by any member, shall be prima facie evidence of the title of the member to such shares.

2[(2)      A certificate may be renewed or a duplicate of a certificate may be issued if such certificate –

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

(b)        having been defaced or mutilated or torn is surrendered to the company.

(3)        If a company with intent to defraud renews a certificate or issues a duplicate thereof, the company shall be punishable with fine which may extend to ten thousand 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 may extend to ten thousand rupees, or with both.

(4)        Notwithstanding anything contained in the articles of association of a company, the manner of issue or renewal of a certificate or issue of a duplicate thereof, the form of a certificate (original or renewed) or of a duplicate thereof, the particulars to be entered in the register of members or in the register of renewed or duplicate certificates, the form of such registers, the fee on payment of which, the terms and conditions, if any (including terms and conditions as to evidence and  indemnity  and the payment of out-of-pocket expenses incurred by a company in investigating evidence) on which  a  certificate may be renewed or a duplicate thereof may be issued, shall  be such as may be prescribed.]

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1.   S. 84 re-numbered as sub-section (1) of that section by Act 65 of 1960, s. 25.

2.   Ins. by s. 25, ibid.

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Kinds of Share Capital

85.        Two kinds of share capital.

(1)        ”Preference share capital” means, with reference to any company limited by shares, whether formed before or after the commencement of this Act, that part of the share capital of the company which fulfils both the following  requirements, namely –

(a)        that as respects dividends, it carries or will carry a preferential  right  to be paid a fixed amount or an amount calculated at a fixed rate, which may be either free  of or subject to income-tax; and

(b)        that as respects capital, it carries or will carry,  on a winding up or repayment of capital, a preferential right to be repaid the amount of the capital paid up or deemed to have been paid up, whether or not there is a preferential right to the  payment  of  either or both of  the following  amounts, namely –

(i)        any money remaining unpaid, in respect of  the  amounts specified in clause (a), up to the date of the winding up  or repayment of capital; and

(ii)        any fixed premium or premium on any fixed scale, specified in the memorandum or articles of the company.

Explanation.-Capital shall be deemed to be preference, capital, notwithstanding that it is entitled to, either or both of the following rights, namely –

(i)         that, as respects  dividends, in addition to the preferential right to the amount specified in clause (a), it has a right to participate, whether fully or to a limited extent,  with capital not entitled to the preferential right aforesaid;

(ii)        that as respects capital, in addition to the preferential right to the repayment, on a winding up, of the amounts specified in clause (b), 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.

(2)        ”Equity share capital” means, with reference to any such company, all share capital which is not preference share capital.

(3         The expressions “preference share” and “equity share” shall be construed accordingly.

86.        New issues of share capital to be only of two kinds.

The share capital of a company limited by shares formed after the commencement of this Act, or issued after such commencement, shall be of two kinds only, namely –

(a)        equity share capital; and

(b)        preference share capital.

87.        Voting rights.

(1)        Subject to the provisions of section 89 and sub-section (2) of section 92 –

(a)       every member of a company limited by shares and holding any equity share capital therein shall have a right to  vote, in respect of such capital, on every resolution placed before the company; and

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

(2)        (a)       Subject as aforesaid and save as provided in clause (b) of this sub-section, 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.

Explanation.- Any resolution for winding up the company or for the repayment or reduction of its share capital shall be deemed  directly to affect the rights attached to preference shares within the  meaning of this clause.

(b)        Subject as aforesaid, every member of a company limited by shares and holding any preference share capital therein shall, in respect of such capital, be entitled to vote on every resolution placed before the company at any meeting, if the dividend due on such capital or any part of such dividend has remained unpaid –

(i)         in the case of cumulative preference shares, in respect of an aggregate period of not less than two years preceding the date of commencement of the meeting; and

(ii)         in the case of non-cumulative preference shares, either in respect of a period of not less than two years ending with the expiry of the financial year immediately preceding the commencement of the meeting or in respect of an aggregate period of not less than three years comprised in the six years ending with the expiry of the financial year aforesaid.

Explanation.- For the purposes of this clause, dividend shall be deemed to be due on preference shares in  respect  of  any  period, whether a dividend has been declared by the company on such shares for such period or not –

(a)        on the last  day specified for the  payment of such dividend for such period, in the articles or other instrument executed by the company in that behalf; or

(b)        in case no day is so specified, on the day  immediately following such period.

(c)       Where the holder of any preference share has a right to vote on any resolution in accordance with the provisions of this sub-section, his voting right on a poll, as the holder of such share, shall, subject to the provisions of section 89 and sub-section (2) of section 92, be in the same proportion as the capital paid up in respect of the preference share bears to the total paid up equity capital of the company.

Prohibition of issue of shares with disproportionate rights

88.        Prohibition of issue of shares with disproportionate rights.

No company formed after the commencement of this Act, or issuing any share capital after such commencement, shall issue any shares (not being preference shares) which carry voting rights or rights in the company as   to   dividend, capital or otherwise which are disproportionate to the rights attaching to the holders of other shares (not being preference shares).

89.        Termination of disproportionately excessive voting rights in existing companies.

(1)        If at the commencement of this Act any shares, by whatever name called, of any existing company limited by shares carry voting rights in excess of the voting rights attaching under sub-section (1) of section 87 to equity shares in respect of which the same amount of capital has been paid up, the company shall, within a period of one year from the commencement of this Act, reduce the voting rights in respect of the shares first mentioned so as to bring them into conformity with the voting rights attached to such equity shares under sub-section (1) of section 87.

(2)        Before the voting rights are brought into such conformity, the holders of the shares in question shall not exercise in respect thereof voting rights in excess of what would have been exercisable by them if the capital paid up on their shares had been equity share capital, in respect of the following resolutions placed  before the company, namely –

(a)        any resolution relating to the appointment or reappointment of a director or of a managing agent or secretaries and treasurers, or to any variation in the terms of an agreement between the company and a  managing or whole time  director  thereof  or its managing agent or secretaries and treasurers;

(b)        any resolution relating to the appointment of buying or selling agents;

(c)        any resolution relating to the grant of a loan or to the giving of a guarantee or any other financial assistance, to any other body corporate having any person as managing agent or secretaries and treasurers who is also either the managing agent or the secretaries and treasurers of the company or an associate of such managing agent or secretaries and treasurers.

(3)        If, by reason of the failure of the requisite proportion of any class of members to agree, it is not found possible to comply with the provisions of subsection (1), the company shall, within one month of the expiry of the period of one year mentioned in that sub-section apply to the Court for an order specifying the manner in which the provisions of that sub-section shall be complied with, and any order made by the Court in this behalf shall bind the company and all its shareholders.

If default is made in complying with this sub-section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to one thousand rupees.

(4)        The Central Government may, in respect of any shares issued by a company before the 1st day of December, 1949, exempt the company from the requirements of sub-sections (1), (2) and (3), wholly or in part, if in the opinion of the Central Government the exemption is required either in the public interest or in the interests of the company or of any class of shareholders therein or of the creditors or any class of creditors thereof.

Every order of exemption made by the Central Government under this sub-section shall be laid before both Houses of Parliament as soon as may be after it is made.

1[90.     Savings.

(1)        Nothing in sections 85, 86, 88 and 89 shall, in the case of any shares issued by a public company before  the commencement of this Act, affect any voting rights attached to the shares save as otherwise provided in section 89, or any rights attached to the shares as to dividend, capital or otherwise.

(2)        Nothing in sections 85 to 89 shall apply to a private company, unless it is a subsidiary of a public company.

(3)        For the removal of doubts, it is hereby declared that on and from the commencement of the Companies (Amendment) Act, 1974 (41 of 1974), the provisions of section 87 shall apply in relation to the voting rights attached to preference shares issued by a public company before the 1st day of April, 1956, as they apply to the preference shares issued by a public company after that date.

Explanation.- For the purposes of this section references to a public company shall be construed as including references to a private company which is a subsidiary of a public company.]

Miscellaneous provisions as to share capital

91.        Calls on shares of same class to be made on uniform basis.

Where after the commencement of this Act, any calls for further share capital are made on shares, such calls shall be made on a uniform basis on all shares falling under the same 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.

92.        Power of company to accept unpaid share capital, although not called up.

(1)        A company may, if so authorized by its articles, accept from any member the whole or a part of the amount remaining unpaid on any shares held by him, although no part of that amount has been called up.

(2)        The member shall not however be entitled, where the company is one limited by shares, to any voting rights in respect of the moneys so paid by him until the same would but for such payment, become presently payable.

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1.   Subs.  by Act 41 of 1974, S. 10, for section 90  (w.e.f.  1-2-1975).

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93.        Payment of dividend in proportion to amount paid up.

A company may, if so authorized by its articles, pay dividends in proportion to the amount paid up on each share where a larger amount is paid up on some shares than on others.

94.        Power of limited company to alter its share capital.

(1)        A limited company having a share capital, may, if so authorized by its articles, alter the conditions of is memorandum as follows, that is to say, it may –

(a)        increase its share capital by such amount as it  thinks expedient by issuing new shares;

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

(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)        subdivide 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 powers conferred by this section shall be exercised by the company in general meeting and shall not require to be confirmed by the Court.

(3)        A cancellation of shares in pursuance of this section shall not be deemed to be a reduction of share capital within the meaning of this Act.

1[94A.   Share capital to stand increased where an order is made under section 81(4).

(1)        Notwithstanding anything contained in this Act, where the Central Government has, by an order made under sub-section (4) of section 81, directed that any debenture or loan or any part thereof shall be converted into shares in a company, the conditions contained in the memorandum of such company shall, where such order has the effect of increasing the nominal share capital of the company, stand altered and the nominal share capital of such company shall stand increased by an amount equal to the amount of the value of the  shares  into which such debentures or loans or part thereof  has been converted.

(2)       Where, in pursuance of an option attached to debentures issued or loans raised  by the company, any public financial institution proposes to convert such debentures or loans into shares in the company, the Central Government may, on the application of such public financial institution, direct that the conditions contained  in the memorandum of such company shall stand altered and  the nominal share capital of such company shall stand increased by an amount equal to the amount of the value of the shares into which such debentures or loans or part thereof has been converted.

(3)        Where the memorandum of a company becomes altered, whether by reason of an order made by the Central Government under sub-section (4)  of  section 81 or sub-section (2) of this section, the Central Government  shall send a copy of such order to the Registrar and also to the company and on receipt of such order, the company shall file in the  prescribed form, within thirty days from the date of such receipt, a return to the Registrar with regard to the increase of share capital and the Registrar shall, on receipt of such order and return, carry out the unnecessary alterations in the memorandum of  the company.

95.        Notice to Registrar of consolidation of share capital conversion of shares into stock, etc.

(1)        If a company having a share capital has –

(a)        consolidated and divided its share capital into shares of larger amount than its existing shares;

(b)        converted any shares into stock;

(c)        re-converted any stock into shares;

(d)        sub-divided its shares or any of them;

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1.   Ins. by Act 41 of 1974, s. 11(w.e.f. 1-2-1975).

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(e)        redeemed any redeemable preference shares; or

(f)         cancelled any shares, otherwise than in connection with a reduction of share capital under sections 100 to 104; the company shall within 1[thirty days] after doing so give notice thereof to the Registrar specifying, as the case may be, the shares, consolidated, divided, converted, sub-divided, redeemed or cancelled, or the stock reconverted.

(2)       The Registrar shall thereupon record the notice, and make any alterations which may be necessary in the company’s memorandum or articles or both.

(3)       If default is made in complying with sub-section (1), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees for every day during which the default continues.

96.        Effect of conversion of shares into stock.

Where a company having a share capital has converted any of its shares into stock, and given notice of the conversion to the Registrar, all the provisions of this Act which are applicable to shares only, shall cease to apply as to so much of the share capital as  is converted into stock.

97.        Notice of increase of share capital or of members.

(1)        Where a company having a share capital, whether its shares have or have not been converted into stock, has increased its share capital beyond the authorised capital, and where a company, not being a company limited by shares, has increased the number of its members beyond the registered number, it shall file with the Registrar, notice of the increase of capital or of members within 2[thirty] days after the passing of the resolution authorising the increase; and the Registrar shall record the increase and also make any alterations which may be necessary in the company’s memorandum or articles or both.

(2)        The notice to be given as aforesaid shall include particulars of the classes of shares affected and the conditions, if any, subject to which the new shares have been or are to be issued.

(3)        If default is made in complying with this section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees for every day during which the default continues.

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1.   Subs.  by   Act 31 of 1965, s. 62 and Sch.,  for  ”one  month” (w.e.f. 15-10 1965).

2.   Subs. by s. 62 and Sch., ibid., for “fifteen”  (w.e.f.  15-10-1965).

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98.        Power of unlimited company to provide for reserve share capital on re-registration.

An unlimited company having a share capital may, by its resolution for registration as a limited company in pursuance of 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,  but 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.

99.        Reserve liability of limited company.

A limited company may, by special resolution, determine that any portion of its share capital which has not been already called up shall not be capable of being called up, except in the event and for the purposes of the company being wound up, and thereupon that portion of its share capital shall not be capable of being called up except in that event and for those purposes.

Reduction of Share Capital

100.      Special resolution for reduction of share capital.

(1)        Subject to confirmation by the Court, a company limited by shares or a company limited by guarantee and having a share capital, may, if so authorized by its articles, by special resolution, reduce  its  share capital  in  any way; and in particular and without prejudice  to  the generality ‘of the foregoing power, may –

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

(b)        either with or without  extinguishing  or reducing liability on any of its shares, cancel any paid-up share capital which is lost, or is unrepresented by available assets; or

(c)        either with or without extinguishing or reducing liability on any of its shares, pay off any  paid-up  share capital which is in excess of the wants of the company; and  may,  if  and so far as is necessary,  alter  its  memorandum  by reducing   the  amount  of  its  share  capital  and  of its   shares accordingly.

(2)        A special resolution under this section is in this Act referred to as “a resolution for reducing share capital”.

101.      Application to Court for confirming order, objections by creditors, and settlement of list of objecting creditors.

(1)        Where a company has passed a resolution for reducing share capital, it may apply, by petition, to the Court for an order confirming the reduction.

(2)        Where the-proposed reduction of share capital involves either the diminution of liability In respect of unpaid share capital or the payment to any shareholder of any paid-up share capital, and in any other case if the Court so directs, the following provisions shall have effect, subject to the provisions of sub-section (3) –

a)         very creditor of the company who at the date fixed by the Court is entitled to any debt or claim which, if that date were the commencement of the winding up of the company, would  be admissible in proof against the company, shall  be entitled to object to the reduction;

(b)        the Court shall settle a list of creditors so entitled to object, and for that purpose shall ascertain, as far as possible without requiring an application from any creditor, he names of those creditors and the nature and amount of their debts or claims, and may publish notices fixing a day or days within which creditors not entered on the list are to claim to be so entered or are to be excluded from the right of objecting to the reduction;

(c)        where a creditor entered on the list  whose  debt  or claim is not  discharged or has not  determined does not consent to the reduction’, the Court may, if it thinks  fit, dispense  with the consent of that creditor, on  the  company securing payment of his debt or claim by appropriating,  as the Court may direct, the following amount –

(i)         if the company admits the full amount of the debt or claim, or, though not admitting it, is willing to provide  for  it, then, the full amount of the  debt or claim;

(ii)         if the company does not admit and is not willing to provide for the full amount of the debt or claim, or if the amount is contingent or not, ascertained, then,  an amount fixed by the Court after the like  inquiry and adjudication as if the company were being wound  up  by the Court.

(3)       Where a proposed reduction of share capital involves either the diminution of any liability in respect of unpaid share capital or the payment to any share holder of any paid-up share capital, the Court may, if, having regard to any special circumstances of the case, it thinks proper so to do, direct that the provisions of sub-section (2) shall not apply as regards any class or any classes of creditors.

102.      Order confirming reduction and powers of court on making such order.

(1)        The Court, if satisfied with respect to every creditor of the company who under section 101 is entitled to object to the reduction, that either his consent to the reduction has been obtained or his debt or claim has been discharged, or has determined, or has been secured, may make an order confirming the reduction on such terms and conditions as it thinks fit.

(2)        Where the Court makes any such order, it may –

(a)        if  for any special reason it thinks proper so to do, make  an order directing that the company shall, during such period commencing on, or at any time after, the date of  the order, as is specified in the order, add to its name as  the last words thereof the words “and reduced”; and

(b)        make an order requiring the company to publish as  the Court  directs  the reasons  for  reduction  or  such  other information  in  regard  thereto  as  the Court  may think expedient  with a view to giving proper information to the public, and, if the Court thinks fit, the causes which led to the reduction.

(3)        Where a company is ordered to add to its name the words “and reduced”,  those words shall, until the expiration  of  the period specified  in  the  order, be deemed to be part of  the name  of  the company,

103.      Registration of order and minute of reduction.

(1)        The Registrar –

(a)        on production to him of an order of  the Court confirming the reduction of the share capital of a company; and

(b)       on the delivery to him of a certified copy of the order and of a minute approved by the Court showing, with  respect to the share capital of the company as altered by the  order,

(i)         the amount  of the share capital,

(ii)        the number of shares [into which it is to be divided, (iii) the amount of each  share and (iv) the amount, if any, at the date  of  the registration deemed to be paid up on each share;

(2)        On the registration of the order and minute, and not before, the resolution for reducing share capital as confirmed by the order shall take effect.

(3)        Notice of the registration shall be published in such manner as the Court may direct.

(4)        The Registrar shall certify under his hand the registration of the order and minute, and his certificate shall be conclusive evidence that all the requirements of this Act with respect to reduction of share capital have been complied with, and that the share capital of the company is such as is stated in the minute.

(5)        The minute when registered shall be deemed to be substituted for the corresponding part of the memorandum of the company, and shall be valid and alterable as if it had been originally contained therein.

(6)        The substitution of any such minute as aforesaid for part of the memorandum of the company shall be deemed to be an alteration of the memorandum within the meaning and for the purposes of section 40.

104.      Liability of members in respect of reduced shares.

(1)        A member of the company, past or present, shall not be liable, in respect of any share, to any call or contribution exceeding in amount the  difference, if any, between the amount paid on the share, or  the 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 minute of reduction:

Provided that, if any creditor entitled in respect of any debt or claim to object to the reduction of share capital 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 the reduction the company is unable, within the meaning of section 434, to pay the amount of his debt or claim, then –

(a)        every person who was a member of the company at the date of the registration of the order for reduction and minute, shall be liable to contribute for 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 to be wound up on the day immediately before the said date; and

(b)        if the company is wound up, the Court, on the application of any such creditor and proof of his ignorance as aforesaid, may, if it thinks fit, settle accordingly 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.

(2)        Nothing in this section shall affect the rights of the contributories among themselves.

105.      Penalty for concealing name of creditor, etc. 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 of is privy to any such concealment or misrepresentation as aforesaid; he  shall be punishable with imprisonment for a term which may  extend to one year, or with fine, or with both.

Variation of Shareholders Rights

1[106.   Alteration of rights of holders of special classes of shares.

Where the share capital of a 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 not less than three-fourths of the issued shares of that class or with the sanction of a special resolution passed at a separate meeting of the holders of the 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.]

Rights of dissentient shareholders

107.      Rights of dissentient shareholders.

(1)        If in pursuance of any provision such as is referred to in section 106, the rights attached to any such class of shares are at any time varied, the holders of not less in the aggregate than ten per cent of issued shares of that class, being persons who did not consent to or vote in favour of the resolution   for the variation, may apply to the Court 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 Court.

(2)        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)        On any such application, the Court after hearing the applicant and any other persons who apply to the Court to be heard and appear to the  Court  to  be  interested in the  application, may, if  it  is satisfied,  having regard to all the circumstances of the  case, that the variation would unfairly prejudice the shareholders of the class represented by the applicant, disallow the variation; and  shall, if not so satisfied, confirm the variation.

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1.   Subs. by Act 65 of 1960, s. 26, for s. 106.

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(4)        The decision of the Court on any such application shall be final.

(5)        The company shall, within 1[thirty] days after the service on the company of any order made on any such application, forward a copy  of the  order  to the Registrar;  and if  default  is made in complying  with this provision, the company, and every officer of  the company  who  is in default, shall be punishable with fine  which  may extend to fifty rupees.

108       Transfer not to be registered except on production of instrument of transfer.

(1)        A company shall not register a transfer of shares in, or debentures of, the company, unless a proper instrument of transfer duly stamped and executed by or on behalf of the transferor and by or on behalf of the transferee and specifying the name, address and occupation, if any, of the transferee, has been delivered to the company along with the certificate relating to the shares or debentures, or if no such certificate is in existence, along with the letter of allotment of the shares or debentures:

Provided that where, on an application in writing made to the company by the transferee and bearing the stamp required for an instrument of transfer, it is proved to the satisfaction of the Board of directors that the instrument of transfer signed by or on behalf of the transferor and by or on behalf of the transferee has been lost, the company may register the transfer on such terms as to indemnity as the Board may think fit:

Provided further that nothing in this section shall prejudice any power of the company to register as shareholder or debenture holder any person to whom the right to any shares in or debentures of the company has been transmitted by operation of law.

2[3[(1A) Every instrument of transfer of shares shall be in such form as may be prescribed, and –

(a)        every such form shall, before it is signed by or on behalf of the transferor and before  any  entry is made therein,  be presented to the prescribed authority, being a person already in the service of the Government, who shall stamp or otherwise  endorse thereon the date on  which it is so presented, and

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1.   Subs. by Act 31 of 1965, s. 62 and Sch., for "fifteen"  (w.e.f. 5-10-1965).

2.   Ins. by s. 13, ibid. (w.e.f. 1-4-1966).

3.   Subs. by Act 37 of 1966, s. 2. for sub-sections (1A), (1B)  and (1C) (w.e.f. 1-4-1966).

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(b)        every instrument  of transfer in the  prescribed form with  the date of such presentation stamped or otherwise endorsed thereon shall, after it is executed by or on behalf of the transferor and the transferee and completed in all  other respects, be delivered to the company –

(i)         in the case of shares dealt in or quoted on a recognised stock exchange, at any time before the date  on which  the register of members is closed, in  accordance with  law,  for  the first time after the  date  of  the presentation  of the prescribed form to  the prescribed authority  under  clause  (a) or within 1[twelve months] from the date of such presentation, whichever is latter;

(ii)         in any other case, within two months from the  date of such presentation.

(1B)      Notwithstanding anything contained in sub-section (1A) an instrument of transfer of shares, executed before the commencement of section 13 of the Companies (Amendment) Act, 1965, (31 of 1965). or executed after such commencement in a form other than the  prescribed form, shall be accepted by a company –

(a)        in the case of shares dealt in or quoted on a recognised stock exchange, at any time not later  than the expiry of six months from such commencement or the date on which  the register of members is closed, in accordance with law, for the first time after such commencement, whichever is later;

(b)        in any other case, at any time not later than  the expiry of six months from such commencement.

(1C)      Nothing contained in sub-sections (1A) and (1B) shall apply to –

(A)        any share –

(i)         which is held by a company in any other body corporate  in the name of a director or nominee in pursuance of sub-section (2), or as the case may be, sub-section(3), of section 49, or

(ii)         which is held by a corporation, owned or controlled by he  Central Government or a State Government, in any other body corporate in the name of a director or nominee, or

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1.   Subs. by Act 31 of 1988, s.15 (w.e.f.15-6-1988).

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(iii)        in respect of which a declaration has been made to the Public Trustee under section 153B, if –

(1)        the company or corporation, as the case may be,  stamps or otherwise endorses, on the form of transfer in respect of such  share,  the date on which it decides that  such share shall not be held in the name of the said director or nominee or,  as the case may be, in the case of any share in  respect of which any such declaration has been made to the Public Trustee, the Public Trustee stamps or otherwise endorses, on the form of transfer in respect of such share under his seal, the date on which the form is presented to him, and

(2)        the instrument of transfer in such form, duly completed in all respects, is delivered to the –

(a)        body  corporate in, whose share such company or corporation has made investment in the name of its  director or nominee, or

(b)        company in which such share is held in trust, within two months of the date so stamped or otherwise endorsed; or

(B)        any share deposited by any person with –

(i)         the State Bank of India, or

(ii)         any scheduled bank, or

(iii)        any banking company (other than a scheduled bank) or  financial institution  approved  by  the Central Government by notification in the Official Gazette (and any such approval may be accorded so as to be  retrospective to any date not earlier than the 1st day of April, 1966), or

(iv)        the Central Government or a State  Government or any  corporation owned  or controlled  by  the  Central Government or a State Government, by way of security for the repayment of any loan or advance  to, or for the performance of any obligation undertaken by, such person, if –

(1)        the bank, institution, Government or corporation, as the case may be, stamps or otherwise endorses on  the form of transfer of such share –

(a)        the date on which such share is returned by  it  to the depositor, or

(b)        in the case of failure on the part of the depositor to repay  the loan or advance or to perform the obligation, the date  on which such share is released for sale by such bank institution,  Government or corporation, as the case may  be or

(c)        where the bank, institution, Government or corporation, as the case may be, intends to get such share registered in its  own name, the date on which the instrument  of  transfer relating to such share is executed by it; and

(2)        the instrument of transfer in such form, duly  completed in  all respects, is delivered to the  company within two months from the date so stamped or endorsed.

Explanation.-Where any investment by a company or a corporation  in the name of its director or nominee referred  to in clause  (A) (i) or clause (A) (ii),  or any  declaration referred  to in clause (A) (iii), or any deposit referred  to in clause (B), of this sub-section is made after the  expiry of  the period or date mentioned in clause (a) of sub-section (1B)  or after the expiry of the period mentioned  in  clause (b) of  that sub-section, as the case may be,  the form of transfer, in respect of the share which is the  subject  of such investment, declaration or deposit, means the prescribed form; or

(C)       any share which is held in any company by the Central Government or a State Government in the name of its  nominee, except that every instrument of transfer which is executed on or after the 1st day of October, 1966, in respect of any such share shall be in the prescribed form.]

(1D)      Notwithstanding anything in sub-section (1A) or sub-section (1B) 1[or sub-section (1C)], where in the opinion of the Central Government it is necessary so to do to avoid hardship in any case, that Government may on an application made to it in that behalf, extend the periods mentioned in those sub-sections by such further time as it may deem fit 1[whether such application is made before or after the expiry of the periods aforesaid]; and the number of extensions granted hereunder and the period of each such extension shall be shown in the annual report laid before the Houses  of  Parliament  under section 638.]

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1.   Ins. by Act 37 of 1966, s. 2 (w.e.f. 1-4-1966).

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(2)        In the case of a company having no share capital, sub-section (1) shall apply as if the references therein to shares were references instead to the interest of the member in the company.

1[(3)     Nothing contained in this section shall apply to transfer of security effected by the transferor and the transferee both   of whom are entered as beneficial owners in the records of a depository.]

Restriction on acquisition of certain shares

2[108A. Restriction on acquisition of certain shares.

(1)       Except with the previous approval of the Central Government, no individual, firm, group, constituent of a group, body corporate or bodies corporate under  the  same management, shall  jointly or severally acquire or agree to acquire, whether in his or its own name or in the name of any other person, any equity shares in a public company, or a private  company  which is a subsidiary of a public  company, if the total  nominal value of the equity shares intended to be  so  acquired exceeds, or would, together with the total nominal value of any equity shares  already held in the company by such individual,  firm,  group, constituent of a group, body corporate or  bodies corporate under the same  management, exceed twenty-five per cent. of the  paid-up  equity share capital of such company.

(2)        Where any individual, firm. group constituent of a group, body corporate or bodies corporate under the same management (hereafter in this Act referred to as the acquirer), is prohibited, by sub-section (1), from acquiring or agreeing to acquire except with the previous approval of the Central Government, any share of a public company or a private company which is a subsidiary of the company, no –

(a)        company in which not  less than fifty-one per  cent  of the share capital is held by the Central Government; or

(b)        corporation (not  being a company) established  by or under any Central Act; or

(c)        financial institution, shall transfer or agree to transfer any share to such acquirer unless such acquirer has obtained the previous  approval  of  the  Central Government  for the acquisition, or agreement for the acquisition, of such share.

108B.    Restriction on transfer of shares.

(1)        Every body corporate or bodies corporate under the same management, holding, whether singly or in the aggregate, ten per cent. or more of the nominal value of the subscribed equity share capital of any other company  shall,  before transferring one or more of  such shares, give  to  the  Central Government an intimation of its or their proposal to  transfer  such share, and every such intimation shall include a statement as to  the particulars of  the share proposed to be transferred,  the name and address of the person to whom the share is proposed to be transferred, the share holding, if any, of the proposed transferee in the concerned company and such other particulars as may be prescribed.

(2)        Where, on receipt of an intimation given under sub-section (1) or otherwise, the Central Government is satisfied that as a result of such transfer, a change in the composition of the Board of directors of the company is likely to take place and that such change would be prejudicial to the interests of the company or to the public interest, it may, by order, direct that –

(a)        no such  share shall be transferred to the proposed transferee:

Provided  that  no such  order  shall  preclude the body corporate or bodies corporate from intimating in accordance with the provisions of sub-section (1), to the Central Government its or their proposal to transfer the share to any other person, or

(b)        where such share is held in a company engaged in any industry specified in Schedule XV, such share shall be transferred to the Central Government or to such corporation owned or controlled by that Government as may be specified in  the direction.

(3)        Where  a direction is made by the Central  Government  under clause (b) of sub-section (2), the share referred to in such direction shall stand  transferred  to  the  Central Government or to the Corporation specified  therein,  and the Central  Government or  the specified corporation, as the case may be, shall pay. in cash, to  the body corporate  or bodies  corporate from  which  such  share  stands transferred, an amount equal to the market value of such share, within the time specified in sub-section (4).

Explanation.--In  this sub-section, "market value" means, in  the case of a share which is quoted on any recognised stock exchange value quoted  at such stock exchange on the date immediately  preceding  the date on  which the direction is made, and, in any  other  case, such value  as may be mutually agreed upon between the holder of the share and the Central Government or the specified corporation, as the  case may  be, or in the absence of such agreement, as may be determined  by the court.

(4)        The market value referred to in sub-section (3) shall be given forthwith, where there is no dispute as to such value or where such value has been mutually agreed upon, but where there is a dispute as to the market value, such value as is estimated by the Central Government or the corporation, as the case may be, shall be given forthwith and the balance, if any, shall be given within thirty days from the date when the market value is determined by the court.

(5)        If the Central Government does not make any direction under sub-section (2) within sixty days from the date of receipt by it of the intimation given under sub-section (1), the provisions contained in sub-section (2) with regard to the transfer of such share shall not apply.

108C.    Restriction on the transfer of shares of foreign companies.

No body corporate or bodies corporate under the same management, which holds. or hold in the aggregate, ten per cent. or more of the nominal value of the equity share capital of a foreign company, having an established  place of business in India, shall transfer any  share  in such  foreign company to any citizen of India or any body corporate incorporated in India except with the previous approval of the Central Government and such previous approval shall not be refused unless the Central Government is of opinion that such transfer would be prejudicial to the public interest.

108D.    Power of Central Government to direct companies not to give effect to the transfer.

(1)        Where the Central Government is satisfied that as a result of the transfer of any share or block of shares of a company, a change in the controlling interest of the company is likely to  take place  and  that such change would  be  prejudicial  to  the interests of the company or to the public interest, that Government may direct  the  company not to give effect to the transfer  of  any  such share or block of shares and –

(a)        where the transfer of such share or block of  shares has already been registered, not to permit the transferee or any nominee or proxy of the transferee, to exercise any voting or other rights attaching to such share or block of shares; and

(b)        where the transfer of such share or block of shares has not  been registered, not to permit any nominee or proxy of the  transferor  to  exercise  any  voting  or  other  rights attaching to such share or block of shares.

(2)        Where any direction is given by the Central Government under sub-section (1), the share or the block of shares referred to therein shall stand retransferred to the person from whom it was acquired, and thereupon the amount paid by the transferee for the acquisition of such share or block of shares shall be refunded to him by the person to whom such share or block of shares stands or stand retransferred.

(3)        If the  refund referred 'GO in sub-section (2) is not made within the  period  of thirty days from the  date of  the  direction referred to in sub-section (1), the Central Government shall, on the application of the  person entitled to get the  refund,  direct,  by order, the refund of such amount and such order may be enforced as  if it were a decree made by a civil court

(4)        The person to whom any share or block of shares stands or stand retransferred under sub-section (2) shall, on making  refund under sub-section  (2) or sub-section (3), be  eligible to exercise voting or other rights attaching to such share or block of shares.

108E.    Time within which refusal to be communicated.

Every request made to the Central Government for according its approval to the proposal for the acquisition of any share referred to in section 108A or  the  transfer of any share referred to in section  108C shall be presumed  to have been granted unless, within a period of  sixty days from the  date  of receipt of such request, the Central  Government communicates to  the person by whom the request was  made,  that  the approval prayed for cannot be granted.

108F.    Nothing in sections 108A to 108D to apply to Government companies, etc.

Nothing contained in section 108A [except sub-section (2) thereof] shall apply to the transfer of any share to, and nothing in section 108B or section 108C or section 108D shall apply to the transfer of any share by –

(a)        any company in which not less than fifty-one per cent of the share capital is held by the Central Government;

(b)        any corporation (not being a company) established by or under any Central Act;

(c)        any financial institution.

108G.   Applicability of the provisions of sections 108A to 108F.

The  provisions of sections 108A to 108F (both inclusive) shall  apply to  the acquisition or transfer of shares or share capital by, or  to, an individual, firm, group, constituent of a group, body corporate or bodies corporate under the same management, who or which –

(a)        is, in case of acquisition of shares or share  capital, the owner  in relation to a dominant undertaking  and  there would be, as a result of such acquisition, any increase –

(i)         in the production, supply, distribution or control of any goods that are produced, supplied, distributed or controlled in India or any substantial part thereof by  that  dominant undertaking, or

(ii)         in the  provision or control of any services that are rendered in  India or any substantial part thereof  by that dominant undertaking; or

(b)        would be, as a result of such acquisition or transfer of shares or share capital, the owner of a dominant undertaking; or

(c)       is, in case of ,transfer of shares or share capital,  the owner in relations to a dominant undertaking.

108H.    Construction of certain expressions used in sections 108A to 108G.

The expressions “group”, “same management”, “financial institution”, “dominant undertaking” and “owner” used in sections 108A to 108G (both inclusive), shall  have the meanings respectively assigned to them in the Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969).

3[108-I. Penalty for acquisition or transfer of share in contravention of sections 108A to 108D.

(1)        Any person who acquires any share in contravention of the provisions of section 108A shall be punishable with imprisonment for a term which may extend to three years, or with fine which may extend to five thousand rupees, or with both.

(2)        (a)        Every body corporate which makes any transfer of  shares without  giving any intimation is required by section 108B, shall be punishable with fine which may extend to five thousand rupees.

(b)       Where any contravention of the provisions of section 108B has been made by a company, every officer of the company.  who in default  shall  be punishable with imprisonment for a term  which may extend to three years, or with fine which may extend to five thousand rupees, or with both.

(3)        (a)       Every body corporate which makes any transfer of  shares in contravention of the provisions  of section 108C, shall be punishable with fine which may extend to five thousand rupees.

(b)       Where any contravention of the provisions of section 108C has been made by a company, 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 may extend to five thousand rupees, or with both.

(4)        (a)        Every person who transfers any share in contravention of any order made by the Central Government under section 108B, or  gives effect  to  any  transfer  of shares  made  in contravention of any direction  made by the Central Government under section 108D,  or  who exercises any voting right in respect of any share in contravention of any direction made by the Central Government under section 108D, shall be  punishable with imprisonment for a term which may extend  to  five years and shall also be liable to fine.

(b)        If any company gives effect to any voting or other right exercised in relation to any share acquired in contravention of the provisions of section 108B, or which gives effect to any voting right in contravention of any direction made by the Central Government under section 108D the company shall be punishable with fine which may extend to five thousand rupees, and every officer of the company who is in default shall be punishable with imprisonment for a term   which may exetend to three years, or with fine which may extend to five thousand rupees, or with both.

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1.   Ins. by Act 22 of 1996, s.31 and Sch. (w.e.f. 20-9-1995).

2.   Sections 108A to 108H were ins.  by Act 41 of  1974, s. 12 (w.e.f.  1-2-1975) and omitted by Act 30 of 1984, s. 52 (w.e.f.  1-8-1984) now ins.  by Act  58  of  1991,  s. 28 (w.e.f. 27-9-1991).

3.   Ins. by Act 58 of 1991, s.28 (w.e.f. 27-9-1991).

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Transfer by legal representative

109.      Transfer by legal representative.

A transfer of the share or other interest in a company of a deceased member thereof made by his legal representative shall, although the legal representative is not himself a member, be as valid as if he had been a member at the time of the execution of the instrument of transfer.

110.      Application for transfer.

(1)        An application for the registration of a transfer of the shares or other interest of a member in a company may be made either by the transferor or by the transferee.

(2)        Where the application is made by the transferor and relates to partly paid shares, the transfer shall not be registered, unless the company gives notice of the application to the transferee and the transferee makes no objection to the transfer within two weeks from the receipt of the notice.

(3)        For the purposes of sub-section (2), notice to the transferee shall be deemed to have been duly given if it is despatched by pre-paid registered post to the transferee at the address given in the instrument of transfer and shall be deemed to have been duly delivered at the time at which It would have been delivered in the ordinary course of post.

1[111.   Power to refuse registration and appeal against refusal.

(1)        If a company 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 shares or interest of a member in, or debentures of, the company, it shall, within two months 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 transferee and  the transferor or  to the person  giving   intimation of  such transmission, as the case may be, giving reasons for such refusal.

(2)        The transferor or transferee, or the person who gave intimation of the transmission by operation of law, as the case may be, may appeal to the Company Law Board against any refusal of the company to register the transfer or transmission, or against any failure on its part within the period referred to in subsection (1), either to register the transfer or transmission or to send notice of its refusal to register the same.

(3)        An  appeal  under sub-section (2) shall be made  within  two months  of  the  receipt of the notice of such refusal  or, where  no notice has been sent by the company, within four months 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)        the name of any person –

(i)         is, without sufficient cause,  entered  in the register of members of a company, or

(ii)        after having been entered in the register, is without sufficient cause, omitted there from; or

(b)        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 [including a refusal  under sub-section (1)], the  person aggrieved, or any member of the company, or the  company, may apply to the Company Law Board for rectification of the register.

(5)       The Company Law Board, while dealing with an appeal preferred under sub-section (2) or an application made under sub-section (4) may, after hearing the parties, either dismiss the appeal or reject the application, 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 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)        The Company Law Board, while acting under sub-section (5), may, at its discretion make –

(a)        such interim orders, including  any orders as to injunction or   stay, as it may deem fit and just;

(b)        such orders as to costs as it thinks fit; and

(c)        incidental or consequential orders regarding payment of dividend or the allotment of bonus or rights shares.

(7)        On any application under this section, the Company Law Board –

(a)        may decide any question relating to the title of any person who  is a party to the application to have  his  name entered in, or omitted from, the register;

(b)        generally,  may decide any question which it is necessary or  expedient to decide in connection with the application for rectification.

(8)        The provisions of sub-sections (4) to (7) shall apply in relation to the rectification of the register of debenture-holders as they apply in relation to the rectification of the register of members.

(9)        If default is made in giving effect to the orders of the Company Law Board under this section, the company and every officer of the company who is in default shall be punishable with fine which may extend to one thousand rupees, and with a further fine which may extend to one hundred rupees for every day after the first day after which the default continues.

(10)       Every appeal or application to the Company Law Board under sub-section (2) or sub-section (4) shall be made by a petition in writing and shall be accompanied by such fee as may be prescribed.

(10)         In the case of a private company which is not a subsidiary of a public company, where the right to any shares or interest of a member in, or debentures of, the company is transmitted by a sale thereof held by a court or other public authority, the provisions of sub-sections (4) to (7) shall apply as if the company were a public company:

Provided that  the Company Law Board may, in lieu  of  an  order under sub-section (5), pass an order directing the company to register the  transmission  of the right unless any member or  members  of  the company specified in the order acquire the right aforesaid within such time  as may, be allowed for the purpose by the order, on  payment  to the purchaser of the price paid by him therefore or such other sum  as the  Company Law Board may determine to be a reasonable  compensation for the right in all the circumstances of the case.

(12)       If default is made in complying with any of the provisions of this section, the company and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees for every day during which the default continues.

(11)         Nothing in this section and section 108, 109 or 110 shall prejudice any power of a private company under its articles to enforce the restrictions contained therein against the right to transfer the shares of such company.

2[(14)    In this section "company" means a private company and includes a private company which had become a public company by virtue of section 43A of this Act.]

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1.   Subs. by Act 31 of 1988, s.16 (w.e.f. 31-5-1991).

2.   Ins. by Act 22 of 1996, S.31 and Sch. (w.e.f. 20-9-1995).

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Rectification of register of transfer

111A.    Rectification of register of transfer.

(1)        In this section, unless the context otherwise requires, “company” means a company other than a company referred to in sub-section (14) of section 111 of this Act.

(2)        Subject to the provisions of this section, the shares or debentures and any interest therein of a company shall be freely transferable.

(3)        The Company Law Board may, on an application made by a depository, company, participant or investor or the  Securities  and Exchange Board of India within two months from the date of transfer of any shares or  debentures held by a depository or from the date on which the instrument of transfer or the intimation of transmission was delivered to the company, as the case may, be, after such enquiry as it thinks fit, direct any company or depository to rectify register or records if the   transfer  of  the  shares  or  debentures  is  in contravention of any of the provisions of the Securities and  Exchange Board  of India Act, 1992 (15 of 1992), or regulations made there under or the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986).

(4)        The Company Law Board while acting under sub-section (3), may at its description make such interim order as to suspend the voting rights before making or completing such enquiry.

(5)        The provisions of this section shall not restrict the right of a holder of shares or debentures, to transfer such shares or debentures and any person acquiring such shares or debentures shall be entitled to voting rights unless the voting rights have been suspended by an order of the Company Law Board.

(6)        Notwithstanding anything contained in this section, any further transfer, during the pendency of the application with the Company Law  Board,  of  shares  or  debentures  shall  entitle  the transferee  to  voting  rights  unless the voting rights in respect of such transferee have also been suspended.

(7)        The provisions of sub-sections (5), (7), (9), (10) and (12) of section 111 shall, so far as  may  be,  apply  to  the  proceedings before  the  Company Law Board under this section as they apply to the proceedings under that section].

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1.   Ins. by Act 22 of 1986, s. 31 and Sch. (20-9-1995).

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112.      Certification of transfers.

(1)        The certification by a company of any instrument of transfer of shares in, or debentures of, the company, shall be taken as a representation by the company to any person acting on the faith of the certification that there have been produced to the company such documents as on the face of them show a prima facie title to the shares or debentures in the transferor named in the instrument of transfer, but not as a representation that the transferor has any title to the shares or debentures.

(2)        Where any person acts on the faith of an erroneous certification made by a company negligently, the company shall be under the same liability to him as if the certification had been made fraudulently.

(3)        For the purposes of this section –

(a)        an  instrument  of  transfer  shall  be  deemed  to  be certificated if it bears the words “certificate lodged”  or words to the like effect;

(b)        the certification of an instrument of transfer shall be deemed to be made by a company, if –

(i)  the person issuing the certificated instrument is a person  authorised to issue such instruments of  transfer on the company’s behalf; and

(ii)         the certification is signed by any officer or servant of the company or any other person, authorised to certificate transfers on the company’s behalf, or if a body corporate has been so authorised, by any officer or servant  of  that body corporate;

(c)    a certification shall be deemed to be signed by any person, if it purports to be authenticated by his signature unless  it  is  shown that the  signature  was  placed  there neither by himself nor by any person authorised to  use  the signature  for the purpose of certificating transfers on  the company’s behalf.

Issue of Certificate of Shares, etc.

113.      Limitation of time for issue of certificates.

(1)        1[Every company, unless prohibited by any provision of law or of any order of any court, tribunal or other authority, shall, within three months after  the  allotment of any of its shares, debentures or debenture stock,   and  within  two months  after  the  application for  the registration of  the  transfer  of any  such  shares,  debentures or debenture  stock, deliver, in accordance with the procedure laid down in section 53, the  certificates  of  all  shares,  debentures  and certificates of debenture stocks allotted or transferred:

Provided that the Company Law Board may, on an application being made to it in this behalf by the company, extend any of the periods within which the certificates of all debentures and debenture stocks allotted or transferred shall be delivered under this sub-section, to a further period not exceeding nine months, if it is satisfied that it is not possible for the company to deliver such certificates within the said periods.]

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1.   Subs. by Act 31 of 1988, s.17 (w.e.f. 15-6-1988).

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The expression “transfer”, for the purposes of this sub-section, means a transfer duly stamped and otherwise valid, and does not include any transfer which the company is for any reason entitled to refuse to register and does not register.

(2)       If default is made in complying with 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 hundred rupees for every day during which the default continues.

(3)                 If any company on which a notice-has been served requiring it to make good any default in complying with the provisions of sub-section (1), fails to make good the default within ten days after the service of the notice,  the 1[Company Law Board] may, on the application of the person entitled to have the certificates or the debentures delivered to him, make an order directing the company and any officer of the company to make good the default within such  time as may be specified in the order; and any such order may provide  that all costs of and incidental to the application shall be borne by the company or by any officer of the company responsible for the default.

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

Share warrants

114.      Issue and effect of share warrants to bearer.

(1)        A public company limited by shares, if so authorised by its articles, may, with the previous approval of the Central Government, with respect to any fully paid-up shares, issue under its common seal a warrant stating that the bearer of the warrant is entitled to the shares therein specified, and may provide, by coupons or otherwise, for the payment of the future dividends on the shares specified in the warrant.

(2)        The warrant aforesaid is in this Act referred to as a “share warrant”.

(3)        A share warrant shall entitle the bearer thereof to the shares therein specified, and the shares may be transferred by delivery of the warrant

115.      Share warrants and entries in register of members.

(1)        On the issue of a share warrant, the company shall strike out of its register of members the name of the member then entered therein as holding  the shares specified in the warrant as if he had ceased to be a  member, and shall enter in that register the following particulars, namely –

(a)        the fact of the issue of the warrant;

(b)       a statement  of the shares specified in the warrant, distinguishing each share by its number; and

(c)        the date of the issue of the warrant.

(2)        The bearer of a share warrant shall, subject to the articles of the company, be entitled, on surrendering the warrant for cancellation and paying such fee to the company as the, Board of directors may from  time to time determine, to have his name entered as a member  in the register of members.

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1.   Subs. by Act 31 of 1988, s.17 (w.e.f. 31-5-1991).

2.   Ins. by Act 22 of 1996, s.31 and Sch. (w.e.f. 20-9-1995).

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(3)        The company shall be responsible for any loss incurred by any person by reason of the company entering in its register of members the name of a bearer of a share warrant in respect of the shares therein specified, without the warrant being surrendered and cancelled.

(4)        Until the warrant is surrendered, the particulars specified in sub-section (1) shall be deemed to be the particulars required by this Act to be entered in the register of members; and, on the surrender, the  date  of  the surrender  shall  be  entered  in  that register.

(5)        Subject to the provisions of this Act, the bearer of a share warrant may, if the articles of the company so provide, be deemed to be a member of the company within the meaning of this Act, for any purposes defined in the articles.

(6)        If default is made in complying with any of the requirements of this section, the company and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees for every day during which the default continues.

116.      Penalty for personation of shareholder.

If any person deceitfully personates an owner of any share 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 share 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 may extend to three years  and  shall also be liable to fine.

117.      Debentures with voting rights not to be issued hereafter.

No company  shall, after the commencement of this  Act,  issue any debentures  carrying voting  rights at any  meeting of  the company whether generally or in respect of particular classes of business.

118.      Right to obtain copies of and inspect trust deed.

(1)        A copy of any trust deed for securing any issue of debentures shall be forwarded to the holder of any such debentures or any member of the company,  at his request and within seven days of the making  thereof, on payment –

(a)        in the case of a printed trust deed, of 1[such sum as may be prescribed]; and

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1.         Subs. by Act 31 of 1988, s.67 (w.e.f. 15-7-1988).

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(b)        in  the case of a trust deed which has not been printed, of 1[such  sum  as may  be  prescribed for] every one hundred  words or fractional  part thereof required to be copied.

(2)        If a copy is refused, or is not forwarded within  the  time specified  in sub-section (1), the company, and every officer  of  the company who is in default, shall be punishable, for each offence, with fine which may extend to fifty rupees and with a further  fine  which may extend  to twenty rupees for every day during which  the  offence continues.

(3)        The 2[Company Law Board] also, by order. direct that the copy required shall forthwith be sent to the person requiring it.

(4)        The trust deed referred to in sub-section (1) shall also be open to inspection by any member or debenture holder of the company in the same manner, to the same extent, and on payment of the same fees, as if it were the register of members of the company.

Liability of trustees for debenture holders

119.      Liability of trustees for debenture holders.

(1)        Subject to the provisions of this section, any provision contained in a trust deed, for securing an issue of debentures, or in any contract with the holders of debentures 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 liability for breach of trust, where he fails to show the degree of care and diligence required of him as trustee, having  regard to the provisions of the trust deed conferring on him, any powers, authorities or discretions.

(2)        Sub-section (1) shall not invalidate –

(a)        any release  otherwise  validly given in respect of anything  done or omitted to be done by a trustee before  the giving of the release; or

(b)        any provision enabling such a release to be given –

(i)         on the agreement thereto of a majority of  not  less than  three fourths in value of the  debenture  holders present and voting in person or, where proxies are permitted, by proxy, at a meeting summoned for the purpose; and

(ii)         either with respect to specific acts or  commissions or on the trustee dying or ceasing to act.

(3)        Sub-section (1) shall not operate –

(a)        to invalidate  any  provision in force at the commencement of  this Act so long as any person then entitled to the benefit of that provision or  afterwards given the benefit thereof under sub-section (4) remains a trustee of the  deed in question; or

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1.   Subs. by Act 31 of 1988, s.67 (w.e.f. 15-7-1988).

2.   Subs. by s.67, ibid, (w.e.f. 31-5-1991).

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(b)        to deprive any person of any exemption or right to be indemnified in respect of anything done or omitted to be done by him while any such provision was in force.

(4)        While any trustee of a trust deed remains entitled to the benefit of a provision saved by sub-section (3), the benefit of that provision may be given either –

(a)        to all trustees of the deed, present and future; or

(b)        to any named trustees or proposed trustees thereof;

by a resolution passed by a majority of not less than three-fourths in value of the debenture holders present in person or, where proxies are permitted, by proxy, at a meeting called for the purpose in accordance with the provisions of the deed or, if the deed makes no provision for calling meetings, at a meeting called for the purpose in any manner approved by the Court.

Perpetual debentures

120.      Perpetual debentures.

A condition contained in any debentures or in any deed for securing any debentures, whether issued or executed before or after the commencement of this Act, shall not be invalid by reason only that thereby, the debentures are made irredeemable or redeemable only on the happening of a contingency, however remote, or on the expiration of a period, however long.

121.      Power to re-issue redeemed debentures in certain cases.

(1)        Where either before or after the commencement of this Act, a company has redeemed any debentures previously issued, then –

(a)        unless any provision to the contrary, whether express or  implied,  is contained in the  articles, or in the conditions of issue, or in any contract entered into by  the company; or

(b)        unless the company has, by passing a resolution to that effect or by some other act, manifested its intention that the debentures shall be cancelled; the  company shall have, and shall be deemed always to have had,  the right to keep the debentures alive for the purposes of re-issue; and in  exercising  such  a right, the company shall have.  and shall  be deemed always to have had, power to re-issue the debentures either by re-issuing the same debentures or by issuing other debentures in their place.

(2)        Upon such re-issue, the person entitled to the debentures shall have, and shall be deemed always to have had, the same rights and priorities as if the debentures had never been redeemed.

(3)        Where  with the object of keeping debentures alive  for  the purpose  of re-issue, they have, either before or after the  commencement  of  this Act, been transferred to a nominee of  the company, a transfer  from that nominee shall be deemed to be a re-issue for the purposes of this section.

(4)        Where a company has, either before or after the commencement of this Act, deposited any of its debentures to secure advances from time to time on current account or otherwise, the debentures shall not be deemed to have been redeemed by reason only of the account of the company having ceased to be in debit whilst the debentures remained so deposited.

(5)        The re-issue of a debenture or the issue of another debenture in its place under the power by this section given to, or deemed to have been possessed by, a company, whether the re-issue or issue was made before or after the commencement of this Act, shall be treated as  the issue of a new debenture for the  purposes  of  stamp duty, but it shall not be so treated for the purposes of any provision limiting the amount or number of debentures to be issued:

Provided that any  person lending money on the  security of  a debenture  re-issued under  this section which  appears  to  be  duly stamped  may give the debenture in evidence in  any proceedings for enforcing his security without payment of the  stamp  duty  or any penalty in respect thereof, unless he had notice or, but for  his negligence, might have discovered, that the debenture was  not  duly stamped ; but in any such case the company shall be liable to pay  the proper stamp duty and penalty.

(6)        Nothing in this section shall prejudice –

(a)        the  operation  of any decree or order of  a  Court  of competent jurisdiction pronounced or made before the  twenty-fifth  day of February, 1910, as between the parties  to  the proceedings in which the decree or order was made;

(b)        where an  appeal has been preferred against any such decree  or order the operation of any decree or order passed on such appeal, as between the parties to such appeal; or

(c)       any power  to  issue debentures in the  place  of any debentures paid off or otherwise satisfied or extinguished, reserved to a company by its debentures or the securities for the same.

122.      Specific performance of contract to subscribe for debentures.

A contract with a company to take up and pay for any debentures of the company may be enforced by a decree for specific performance.

123.      Payments of certain debts out of assets subject to floating charge in priority to claims under the charge.

(1)        Where either –

(a)        a receiver is appointed on behalf of the holders of any debentures of a company secured by a floating charge; or

(b)        possession is taken by or on behalf of those  debenture holders  of  any property comprised in  or  subject  to  the charge; then,  if the company is not at the time in course of being wound  up, the debts which in every winding up are, under the provisions of  Part VII  relating to preferential payments, to be paid in priority to  all other  debts, shall be paid forthwith out of any assets coming to  the hands  of the receiver or other person taking possession as  aforesaid in priority to any claim for principal. or interest in respect of  the debentures.

(2)        In the application of the provisions aforesaid, section 530 shall be construed as if the provision for payment of accrued-holiday remuneration becoming payable on the termination of employment before or  by  the  effect  of the winding up  order  or  resolution  were  a provision  for payment of such remuneration becoming payable  on  the termination  of employment before or by the effect of the  appointment of the receiver or possession being taken as aforesaid.

(3)        The periods of time mentioned in the said provisions of Part VII shall be reckoned from the date of appointment of the receiver or of possession being taken as aforesaid, as the case may be.

(4)        Where the date referred to in sub-section (3) occurred before the commencement of this Act, sub-sections (1) and (3) shall have  effect  with  the  substitution,  for  references  to  the said provisions  of  Part VII, of references to the  provisions  which, by virtue  of  sub-section (9) of section 530, are deemed  to  remain  in force  in  the case therein mentioned, and subsection  (2) shall  not apply.

(5)        Any payments made under this section shall be recouped, as far as may be, out of the assets of the company available for payment of general creditors.

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