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WORDS & PHRASES JUDICIALLY NOTICED

WORDS & PHRASES JUDICIALLY NOTICED :

Words & Phrases Judicial Interpretation
(1) (2)
‘Accidental omission’/ of the 2013 Act Maharaja Exports v. Apparels Exports Promotion Council [1986]60 Comp. Cas. 353 (Delhi)
The words ‘accidental omission’ as occurring in section 172(3) of the 1956 Act [corresponding to of the 2013 Act] means that the omission must be not only not designed but also not deliberate. This expression implies absence of intention or deliberate design.
‘Accounts’/, proviso, of the 2013 Act Extract from Fifth Annual Report on Working and Administra-tion of Companies Act, 1956 – Year ended 31st March, 1961
The ‘accounts’ [as occurring in section 228(3)(c) of the 1956 Act corresponding to proviso to of the 2013 Act] maintained in the branch office would necessarily depend largely on type of business carried on in branch. However, two requirements, in addition to the other requirements of section 227 of the 1956 Act [corresponding to of the 2013 Act] that might be applicable to any particular branch that have to be complied with, are namely, the auditors should certify that (a) proper books of account have been kept at the branch; and (b) that the accounts or returns of the branch show a true and fair view of the working of the branch.
‘Acquisition of gain’/ of the 2013 Act Tan Waing v. Bo Hein [1933] 3 Comp. Cas. 112 (Rangoon)
‘Gains’ means acquisition. It has no other meaning. Gain is
something obtained or acquired. It is not limited to pecuniary gain. One has to add the word ‘pecuniary’ so to limit. And still less is it limited to commercial profits. The word used is not ‘gains’ but ‘gain’ in the singular. Commercial profits, no doubt, are gain, but there is nothing limiting gain simply to a commercial profit. The words ‘acquisition of gain’ refer to a company which is formed to acquire something, or in which the individual members are to acquire something, as distinguished from a company formed for spending something, and in which the individual members are simply to give something away or to spend something, and not to gain anything. (See section 11(2) of the 1956 Act)
‘After commencement of winding up’/ of the 2013 Act S.P. Bhargava v. Rameshwar Shastri [1952] 22 Comp. Cas. 106(Gwalior)
The expression ‘after the commencement of winding up’ in section 216(2) of the 1913 Act/section 518(2) of the 1956 Act [corresponding to of the 2013 Act] does not refer to the resolution of winding up, but to the time when attachment is put into force.
‘All wages or salary’/ of the 2013 Act Textile Labour Association v. Official Liquidator of JubileeMills [2000] 99 Comp. Cas. 189 (Guj.)
Expression ‘all wages or salary’ in section 529(3)(b)(i) of the 1956 Act [corresponding to of the 2013 Act] does not include bonus payable to workmen under the Payment of Bonus Act or otherwise.
‘Allotment’ as generally defined Florence Land & Public Works Co., In re [1885] LR 29 Ch. D.421
What is termed ‘allotment’ is generally neither more nor less than the acceptance by the company of the offer to take shares. To take the common case, the offer is to take a certain number of shares, or such less number of shares as may be allotted. That offer is accepted by the allotment either of the total number mentioned in the offer or a less number, to be taken by the person who made the offer. This constitutes a binding contract to take that number according to the offer and acceptance. There is no magic whatever in the term ‘allotment’ as used in these circumstances. It is said that the allotment is an appropriation of a specific number of shares.
Mosely v. Koffyfontein Mines Ltd. [1911] 1 Ch. 73
The words ‘creation’, ‘issue’, and ‘allotment’ are used with three different meanings familiar to business people as well as to lawyers. There are three steps with regard to new capital; first, it is created; till it is created the capital does not exist at all. When it is created it may remain unissued for years, the market may not have allowed a favourable opportunity of placing it. When it is issued it may be issued on such terms as appear for the moment expedient. Broadly speaking, it is an appropriation by the directors or the managing body of the company of shares to a particular person.
‘Allotment’/ of the 2013 Act Sri Gopal Jalan & Co. v. Calcutta Stock Exchange Association Ltd. [1963] 33 Comp. Cas. 862 (SC)
‘Allotment’ means the appropriation out of the previously un-appropriated capital of a company, of a certain number of shares to a person. Till such allotment, the shares do not exist as such. It is on allotment in this sense that the shares come into existence. The word ‘allotment’ has not been used to describe a transaction with regard to an existing share, that is, a share previously brought into existence by appropriation to a person out of the authorised capital. In every case, the words ‘allotment of shares’ have been used to indicate the creation of shares by appropriation out of the unappropriated share capital to a particular person.
Sri Gopal Jalan & Co. v. Calcutta Stock Exchange Association Ltd. [1963] 33 Comp. Cas. 862 (SC)
Re-issue of forfeited share is not ‘allotment’ of share within meaning of section 75(1) of the 1956 Act [corresponding to of the 2013 Act].
Calcutta Stock Exchange Association Ltd., In re [1957] 27 Comp. Cas. 559 (Cal.)
The word ‘allotment’ in section 75(1) of the 1956 Act [corresponding to of the 2013 Act] means only the original or the first allotment or the allotment of new shares and not the re-issue of shares in lieu of shares which have for some reason or other been forfeited.
‘Any claim’/ of the 2013 Act Star Engg. Works Ltd. v. Official Liquidator of the Krishnakumar Mills Co. Ltd. [1977] 47 Comp. Cas. 30 (Guj.)
The words ‘any claim’ in section 446(2)(b) of the 1956 Act [corresponding to of the 2013 Act] are wide enough to cover claim of goods supplied to company.
Liberty Finance (P.) Ltd., In re [1979] 49 Comp. Cas. 287 (Delhi)/Faridabad Cold Storage & Allied Industry v. Official Liquidator, Ammonia Supplies Corpn. (P.) Ltd. [1978] 48 Comp. Cas. 432 (Delhi)(FB)
The expression ‘any claim’ as occurring in section 446(2)(b) of the 1956 Act means a claim which is legally enforceable.
Ananta Mills Ltd. v. City Deputy Collector [1972] 42 Comp. Cas. 476 (Guj.)
The grammatical construction of the expression ‘claim against the company’ would include a claim that can be realised by proceeding against the property of the company.
Visalakshi v. Official Liquidator High Court, Madras [2008] 141 Comp. Cas. 661 (Mad.)
The word ‘claim’ in clause (b) of section 446(2) of the 1956 Act means, a claim which is legally enforceable and not barred by limitation of time. Moreover, the term ‘claim’ means in the nature of an actionable claim. In this connection, it is not out of place to point out that an order passed under section 446(2)(b) of the 1956 Act by the competent court can be considered as a decree, which can be enforced for the purpose of realizing the amount ordered to be paid.
Official Liquidator, Radel Services (P.) Ltd. v. Southern Screws (P.) Ltd. [1988] 63 Comp. Cas. 749 (Mad.)
Considered in its widest signification, even a suit for possession based on title or a suit for a declaration of title would be considered as a claim suit. But in the context in which ‘claim’ is used in clause (b) in section 446(2) of the 1956 Act, it will have to be understood in not such wide and extensive signification. The claims referred to in clause (b) are in the nature of actionable money claims or debts due and owing other than mortgage debts or debts secured by pledge of movables or recovery of money or those matters which are, under the specific provisions in the Act, to be summarily dealt with, and not other types of claims by or against the company.
Official Liquidator, Security & Finance (P.) Ltd. v. Pushpa Wati Puri [1978] 48 Comp. Cas. 385 (Delhi)
The claim or liability sought to be enforced under the provisions of section 446(2)(b) of the 1956 Act must relate to an enforceable claim and the expression ‘claim’ in section 446(2) of the 1956 Act would, exclude claims that had become barred by time before the commencement of winding up.
‘Any member of a company’/ of the 2013 Act Shankar Sundaram v. Amalgamations Ltd. [2002] 38 SCL 777/111 Comp. Cas. 252 (Mad.)
The expression, ‘any member of a company’ as found in sections 397 and 398 of the 1956 Act [corresponding to of the 2013 Act] refers to a member or members having interest in 10 per cent share capital in the company and not outsiders and they have a right to apply by virtue of section 399 of the 1956 Act. Section 399 of the 1956 Act [corresponding to of the 2013 Act] makes it clear that the expression, ‘members of a company’ would include a member or members of a particular company. Hence, the expression, ‘any member of a company’ would refer only to a person who is recognized by the company as owner of its shares and whose name is registered in the register maintained by the company.
S.V.T. Spg. Mills (P.) Ltd. v. M. Palanisami [2009] 95 SCL 112 (Mad.)
A reading of sections 397, 398 and 399 of the 1956 Act [corres-ponding to , and of the 2013 Act] makes it abundantly clear that the right of complaining about oppression and mismanagement lies with the ‘member’, of course subject to the requirement under in respect of holding of share capital and the word used is ‘member’ in the abovesaid sections.
The term ‘member’ under section 2(27) of the 1956 Act has to be construed on a larger connotation, which means that the persons other than bearers of share warrants are to be treated as members. This is in apparent contravention of .
If the term ‘member’ as defined in section 41 of the 1956 Act is applied, there would be two categories viz., (i) deemed members who are subscribers to the memorandum, who on registration are entered in the register of members; (ii) other persons whose names are entered in the register of members. In fact, after the Depositories Act, 1996 came into effect, even a depositor who is a beneficial owner, who is actually a person holding equity shares and whose name is entered as a beneficial depositor, can also be deemed to be a member. Taking note of certainly it is a restrictive definition and it has an apparent conflict with which defines a ‘member’ in a broad manner.
The applicability of and is an equitable jurisdiction which is intended to protect the minority members of the company from any oppression and mismanagement at the hands of majority of members. It was in that background, that the Supreme Court in World Wide Agencies (P.) Ltd. v. Margarat T. Desor [1990] (1) SCC 536 had held that the wider meaning of the term ‘member’ should be given in the context of and .
‘Any order’/ of the 2013 Act Miland Exports (P.) Ltd. v. A.V. Venkatanarayana [1995] 83 Comp. Cas. 585 (Kar.)
The words ‘any order’ in section 483 of the 1956 Act [corresponding to of the 2013 Act] shall have to be understood as an order which affects the right of the person who invokes the appellate jurisdiction of the Court.
‘Any order under eithersection’/ of the 2013 Act Mohinidevi Choraria v. Apsara Cinema (P.) Ltd. [1990] 69 Comp. Cas. 233 (Bom.)
The words ‘any order under either section’ clearly suggest only one construction, viz., that if the petitioners want to make an application under section 402 of the 1956 Act [corresponding to of the 2013 Act], they can do so only if the order made under sections 397 and 398 of the 1956 Act [corresponding to and of the 2013 Act] leaves the doors open for such an application.
‘Any other order that it thinks fit’/ of the 2013 Act Nilesh Lalit Parekh, In re [2002] 37 SCL 531/111 Comp. Cas. 177 (Bom.)
Clause (d) of section 443(1) of the 1956 Act [corresponding to
of the 2013 Act] enables the Court to make an order for winding up the company, or make any other order that it thinks fit. It is clear that an order for winding up may be said to be a class of its own and, therefore, the words following it, i.e., ‘or any other order that it thinks fit’ do not contemplate a variant of a winding up order. On the other hand, it appears that the other orders contemplated are orders other than those related to winding up and would include orders such as an order for purchase of shares belonging to the petitioner; the power to issue an order for recall of a winding up order; an order for sale of the company’s assets and to have the sale proceeds deposited in the court for the purpose of making payment to one of the creditors; to order the appointment of a chartered accountant to verify the exact amount payable by the company and any such order that the court may think fit for doing complete justice.
‘Any time’/ of the 2013 Act Malabar Petroleum Co. v. Continental Oil Co. Ltd. [1963] 33 Comp. Cas. 367 (Mad.)
‘Any time’ in section 469(1) of the 1956 Act [corresponding to of the 2013 Act] does not appear to be used with reference to limitation.
‘Arrangement’/, Explanation of the 2013 Act Navjivan Mills Co. Ltd., In re [1972] 42 Comp. Cas. 265 (Guj.)
‘Arrangement’, as occurring in section 390(b) of the 1956 Act[corresponding to Explanation to of the 2013 Act] is something by which parties agree to do a certain thing notwithstanding the fact there was no dispute between the parties.
Investment Corpn. of India Ltd., In re [1987] 61 Comp. Cas. 92 (Bom.)
The word ‘arrangement’ as set out in section 390(b) of the 1956 Act is an inclusive definition and contemplates all arrangements and not only reorganisation of the share capital. This is all the more clear, because the word used is ‘includes’.
Bank of India Ltd. v. Ahmedabad Mfg. & Calico Printing Co. Ltd. [1972] 42 Comp. Cas. 211 (Bom.)
Any scheme, other than a scheme by way of compromise or reconstruction, which affects the rights of the creditors and the members of the company or any class of them, would fall within the term, ‘arrangement’.
India Flour Mills, In re [1934] 4 Comp. Cas. 137 (Sind)
The word ‘arrangement’ as used in section 153 of the 1913 Act must mean something analogous to a compromise.
Hindusthan Commercial Bank Ltd. v. Hindusthan General Electrical Corpn. [1960] 30 Comp. Cas. 367 (Cal.)
The word ‘arrangement’ in section 391 of the 1956 Act is of wide import. By section 390 of the 1956 Act, ‘arrangement’ includes reorganisation of the share capital of the company by the consolidation of shares of different classes or by the division of shares into shares of different classes or both these methods.
Larsen & Toubro Ltd., In re [2004] 54 SCL 461/121 Comp. Cas. 523 (Bom.)
The word ‘arrangement’, as occurring in section 391 of the 1956 Act, though not defined specifically, yet has a wide range and ambit. Where scheme of arrangement is between the company and its shareholders, and/or creditors and the trust, by itself, it cannot be said that the scheme of arrangement is not maintainable or not sustainable.
‘As the case may be’/ of the 2013 Act Teck-men Tools (P.) Ltd., In re [2009] 92 SCL 59 (AP)
The words ‘as the case may be’, as found in section 391(1) of the 1956 Act [corresponding to of the 2013 Act], can only mean that where the scheme of arrangement is between a company and its members, then the Court may order a meeting of the members; and in a case where the scheme of arrangement is between the company and its creditors, then the Court may order a meeting of the creditors. The same words ‘as the case may be’ are also found in sub-section (2) of section 391 of the 1956 Act [corresponding to of the 2013 Act]. It is a sound rule of construction to give the same meaning to the same words occurring in different parts of a statute. It has been justly remarked that, when precision is required, no safer rule can be followed than always to call the same thing by the same name. It is, in all events, reasonable to presume that the same meaning is implied by the use of the same expression in every part of an Act.
The same expression, if it appears more than once in the same statute or for that matter in the same provision, should receive the same meaning, unless the context suggests otherwise, i.e., unless there is a clear indication in the statute itself to show that the Legislature has used the words and phrases with different meanings, or where uniform construction of the words and phrases will lead to absurd conclusions and results.
Ordinarily, a word or expression used at several places in one enactment should be assigned the same meaning so as to avoid a ‘head-on-clash’ between two meanings assigned to the same word or expression occurring at two places in the same enactment.
Since there is nothing in section 391(1) and (2) of the 1956 Act to the contrary, it must be held that the expression ‘as the case may be’ used in sub-section (2) of section 391 of the 1956 Act carries the same meaning as is given to the said expression in sub-section (1) of section 391. When so read, sub-section (2) of section 391 of the 1956 Act would mean that if, in a scheme of arrangement between the company and its members, a meeting of the members is held and 3/4th of those present and voting in the said meeting approve the scheme, it would then bind the dissenting minority of members. Similarly, in a scheme of arrangement between the company and its creditors, where the Court directs that a meeting of the creditors be held and in case 3/4th of the creditors present and voting approve the scheme of arrangement, then the scheme would bind the dissenting minority of the creditors.
‘Assignee’/ of the 2013 Act William C. Leitch Bros. Ltd., In re [1933] 3 Comp. Cas. 97 (Ch.D)
For the purpose of sub-section (2) of section 275 of the English Companies Act, 1929/section 542(2)(b) of the 1956 Act [corresponding to of the 2013 Act] the expression ‘assignee’ includes any person to whom or in whose favour, by the directions of the director, the debt, obligation, mortgage or charge was created, issued or transferred or the interest created but does not include an assignee for valuable consideration (not including consideration by way of marriage) given in good faith and without notice of any of the matters on the ground of which the declaration is made.
‘Assignment’/ of the 2013 Act Oriental Metal Pressing Works (P.) Ltd. v. Bhaskar Kashinath Thakoor [1961] 31 Comp. Cas. 143 (SC)
The word ‘assignment’ in section 312 of the 1956 Act [corresponding to of the 2013 Act] does not include appointment.
‘Association’/, Explanation (b) of the 2013 Act Bangalore Timber Industries v. Madras Sapper Ex-Servicemen’s Rehabilitation Association [1988] 63 Comp. Cas. 733 (Kar.)
The word ‘association’ occurring in section 582(b) of the 1956 Act [corresponding to Explanation (b) to of the 2013 Act] has to be understood in its general sense and not with reference to the provisions contained in section 11 of the 1956 Act [corresponding to of the 2013 Act], prohibiting partnerships or associations consisting of more than 20 members from carrying on any business in matters more particularly mentioned in section 11(2) of the 1956 Act. Thus construed, there could be no bar to maintain a petition for winding-up against an association like the respondents-association duly registered under the Societies Registration Act, as an unregistered company.
‘At any time’/ of the 2013 Act Official Liquidator, Stocking & Sons (P.) Ltd. v. Dr. S.R. Sarma [1970] 40 Comp. Cas. 72 (Mad.)
The language employed by the Legislature in section 468 of the 1956 Act [corresponding to of the 2013 Act] is in pari materia with that employed in section 469(1) of the 1956 Act [corresponding to of the 2013 Act]. Interpreting, therefore, the expression ‘at any time’ appearing in in the light of the ratio in Malabar Petroleum Co. v. Continental Oil Co. [1963] 33 Comp. Cas. 367, it can only mean at such time within the bounds of the law of limitation.
‘At time of making such order or at any time thereafter’/ of the 2013 Act Bhavnagar Vegetable Products Ltd., In re [1984] 55 Comp. Cas. 107 (Guj.)
Clause (b) of sub-section (1) of section 392 of the 1956 Act [corresponding to of the 2013 Act] makes it abundantly clear that the powers conferred by section 392 may be exercised ‘at the time of making such order or at any time thereafter’. The provisions, therefore, envisage exercise of power at the very point of time of making the order, meaning thereby, ‘before’ the order is passed. The expression which follows, namely, ‘at any time thereafter’ lends further support to this construction, namely, that before the order is signed the power can be exercised under the earlier part of the provision and after order is signed, the power can be exercised under the second part of the provision. The expression ‘or at any time thereafter’ leaves no room for doubt that the preceding part contemplates exercise of power at a point of time prior to the making of the order.
‘Attachment, distress or execution put in force’/ of the 2013 Act Ovation International (India) (P.) Ltd., In re [1969] 39 Comp. Cas. 595 (Bom.)
The expression ‘attachment, distress or execution put in force’ as occurring in section 537(1)(a) of the 1956 Act [corresponding to of the 2013 Act] does not include an attachment before judgment.
‘Attachment before judgment’ generally defined Ovation International (India) (P.) Ltd., In re [1969] 39 Comp. Cas. 595 (Bom.)
The very phrase ‘attachment before judgment’ implies that it is not and cannot be the same as an attachment in execution of a decree passed against a defendant on judgment being given.
‘Auditor’/ of the 2013 Act Extract from Minutes of Meeting of Bombay Chambers’ Com-pany Law Sub-Committee with Secretary, Department of Com-pany Law Administration, held on 2-6-1961
The term ‘auditor’ mentioned in section 225(1) of the 1956 Act [corresponding to of the 2013 Act] means statutory auditor (and not branch auditor).
‘Becomes concerned orinterested’/proviso to of the 2013 Act M.O. Varghese v. Thomas Stephen & Co. Ltd. [1970] 40 Comp. Cas. 1131 (Ker.)
The words ‘becomes concerned or interested’ in section 299(2)(a) of the 1956 Act [corresponding to proviso to of the 2013 Act] denote a present state of things.
‘Before date of applica-tion’/ of the 2013 Act Roshan Lal Agarwal v. Sheoram Bubna [1980] 50 Comp. Cas. 243 (Pat.)
The use of the words ‘before the date of the application’ makes no difference in computing the period ‘within three months’ as provided under section 402(f) of the 1956 Act [corresponding to of the 2013 Act].
‘Body Corporate’/ of the 2013 Act Circular No. 8/48/2(7)/63-PR, dated 24-11-1962 and Circular No. 8(26)/2(7)/63-PR, dated 13-3-1963
Any corporate body, i.e., a body which has been or is incorporated under some statute and which has a perpetual succession, a common seal and is a legal entity apart from the members consisting it, will come within the definition of the term ‘body corporate’.
‘Body Corporate’/ of the 2013 Act Circular No. 8/299/56-PR, dated 15-6-1956
The expression ‘body corporate’ occurring in section 299 of the1956 Act [corresponding to of the 2013 Act] is in conformity with the definition given to it in clause (7) of section 2 of the 1956 Act [corresponding to of the 2013 Act] and has not been used in any limited sense so as to apply only to private companies and not to public companies.
‘Books of account and other books and papers’/ of the 2013 Act K. Kanagasabapathy v. T.M. Shanmugham [1972] 42 Comp. Cas. 596 (Mad.)
In the expression ‘books of account and other books and papers’ occurring in section 209(4) of the 1956 Act [corresponding to of the 2013 Act] the words ‘other books and papers’ are more general, whereas the words ‘books of account’ are less general.
‘Business’/ of the 2013 Act B. Ramachandra Adityan v. Educational Trustee Co. (P.) Ltd.[2003] 41 SCL 385/113 Comp. Cas. 334 (Mad.)
The word ‘business’ found in section 11 of the 1956 Act [corresponding to of the 2013 Act] is to be construed to mean any useful activity and it is not necessary to confine it to commercial activity for profit. The charitable companies are not formed or not intended for commercial activities. The word, ‘business’ found in section 11 of the 1956 Act is not confined only to commercial activity for profit in the case of trust-companies.
‘Calls’/ and of the 2013 Act C.P. Gnanasambandam v. Tamilnad Transports (Coimbatore) (P.) Ltd. [1971] 41 Comp. Cas. 26 (Mad.)
The word ‘calls’ as occurring in sections 181 and 399(1)(a) of the 1956 Act [corresponding to and of the 2013 Act] necessarily implies a calling which ordinarily means a calling for the amount due on the share.
‘Carrying on business’/ of the 2013 Act Madan Gopal v. Shewal Dass [1934] 4 Comp. Cas. 339 (Lahore)
The expression ‘carrying on business’ as occurring in section 4 ofthe 1913 Act/Section 11 of the 1956 Act [corresponding to of the 2013 Act] implies some continuous control of the business by the association.
‘Cash paid to company’/ of the 2013 Act Matthew Ellis Ltd., In re [1933] 3 Comp. Cas. 181 (CA)
Where a man advances money to the company on the security ofa debenture, on the terms that the money so advanced is to be applied by the company in discharge of one of its existing liabilities, or in the acquisition of some asset which the company does not at the moment possess, the money paid by the lender does not cease to be ‘cash paid to the company’ (as occurring in section 534 of the 1956 Act [corresponding to of the 2013 Act)] merely by reason of the imposition of that condition. There are, of course, certain considerations for the issue of a debenture which plainly do not amount to payments in cash.
‘Causing it to be delivered’/ of the 2013 Act Sarkar Estates (P.) Ltd. v. Kusumika Iron Works (P.) Ltd. [1962] 32 Comp. Cas. 575 (Cal.)
The expression ‘causing it to be delivered’ as occurring in section 434(1)(a) of the 1956 Act [corresponding to of the 2013 Act] has been introduced to indicate and clarify the place where delivery is to be effected, that is, at the registered office of the company.
‘Change’/ of the 2013 Act Circular No. 8/30(303)/79-CL-V, dated 2-9-1980
Where an additional director or a director appointed in casual vacancy is appointed as a director of the company in the annual general meeting, the nature of his appointment changes radically. It would, therefore, be in the interest of such directors that such changes are notified to the Registrar under section 303(2) of the 1956 Act [corresponding to of the 2013 Act].
‘Charge’/ of the 2013 Act Calcutta National Bank Ltd. v. Rangaroon Tea Co. Ltd. [1970] 40 Comp. Cas. 565 (Cal.)
In a charge the right to sell the property is contractual and can be defeated by a bona fide purchaser for value without notice, whereas, in the case of a mortgage, the right to sell will consist of interest in the property being transferred to the mortgagee and as such it is a right in rem and for properties valued at Rs. 100 or more there is no distinction because of compulsory registration. In the case of a charge as well as in the case of a mortgage two elements are common. First, that there is a loan and, secondly, that there is a security for the repayment of the loan. The only difference between a charge and a mortgage is that in the case of a mortgage there is transfer of interest but in the case of a charge there is no transfer of interest. A mortgage is a jus in rem and a charge a jus ad rem. (See section 125 of the 1956 Act)
‘Circumstances sugges-ting’/ of the 2013 Act Shonkh Technologies Ltd. v. UOI [2009] 89 SCL 335 (Delhi)
The words ‘circumstances suggesting’ as occurring in section 237(b) of the 1956 Act [corresponding to of the 2013 Act] cannot be interpreted to mean conclusive proof. Otherwise, the provision would be rendered nugatory and completely toothless. An investigation is not required if facts are already esta-blished. At the same time, the Legislature has been careful to use the words ‘defraud’, ‘fraudulent’, ‘unlawful purposes’, ‘misfeasance’, ‘other misconduct’, ‘lack of information’, etc., ‘circumstances suggesting’ which must necessarily indicate fraud, misfeasance or like conduct or activities on the part of the company. The provision cannot be rightly invoked on a mere suspicion.
New Central Jute Mills Co. Ltd. v. Dy. Secretary, Ministry of Finance [1966] 36 Comp. Cas. 512 (Cal.)
The expression ‘if in the opinion of the Central Government there are circumstances suggesting’ means that if it appears to the Central Government that there is a likelihood.
‘Class’/ of the 2013 Act State Bank of India v. Engg. Majdoor Sangh [2000] 27 SCL 103 (Guj.)
Those who are offered substantially different compromises, each will form a different class. Even if there are different groups within a class, the interests of which are different from the rest of the class or who are to be treated differently in the scheme, such groups must be treated as separate classes for the purpose of the scheme. The group styled as a class should ordinarily be homogeneous and must have commonality of interest and the compromise offered to them must be identical. (See section 391(1) of the 1956 Act)
State Bank of India v. Alstom Power Boilers Ltd. [2003] 43 SCL 449/116 Comp. Cas. 1 (Bom.)
It is difficult to define as to what constitutes a ‘class’. Whether a particular group of members or creditors would form a class distinct from other members or creditors would largely depend on the facts and circumstances of each case, the Court being required to consider several factors. One should refrain from making an attempt to comprehensively define what constitutes a ‘class’. One can, however, state the following factors which would generally be taken into consideration by the Court in deciding whether a person or group of persons form a separate class so as to require convening of a separate meeting of such a class.
In case of shareholders, the Act recognises only two classes, namely, equity shareholders and the preference shareholders. Though further sub-classification amongst the equity sharehol-ders or preference shareholders is not impermissible, yet mere fact that the equity shares (equity or preference) are issued at different times would not make them a different class. Similarly, the mere fact that the preference shares are redeemable on different dates would not make them shares of different classes. However, in some cases, the equity shares which are fully paid-up and equity shares which are partly paid-up may form different classes like where they are to be exchanged for the shares of the transferee-company to be issued in different proportions, depending upon their paid-up value.
One of the tests to determine whether the two or more groups of members or creditors form a different class is whether the same scheme of arrangement or compromise offers the same terms to all or whether different terms are offered. If the scheme offers to the two groups of members or creditors different terms of arrangement, they would generally form a different class.
Another test is to see whether the rights of the two or more groups of members or creditors are so dissimilar that they cannot reasonably be expected to have a common interest and are not likely to consult together to have a common view of their common interest. If their interests are so dissimilar that they are reasonably unlikely to take the same view about the scheme and would reasonably feel that any one view would unreasonably benefit one or unreasonably prejudice the other, then they would form different classes.
The private interest of one or a group of members or creditors vis-a-vis the directors of the company or the persons in the management of the company are alien for the purpose of classification.
While in the case of shareholders, the Court would not generally favour a further sub-classification other than equity shareholders and preference shareholders, there may be need for making a further sub-classification in case of creditors of the company. Apart from the broad distinct classes like secured and unsecured creditors, there can be further sub-classes. In case of secured creditors, some creditors may have sufficient security of specific asset or assets which are greater than the amount of their debt while others may have security of other specific asset or assets which are not sufficient to meet their credits. Some secured creditors may have a first charge; some may have a second or subsequent charge; some may have a specific charge attached to a particular piece of property in existence on the date of creation of the charge and some may have only a floating charge hovering over and floating with the property intended to be affected, until it fastens on specific property on happening of some event. It would depend upon the facts and circumstances of each case, whether there would be any need for further sub-classification even amongst the secured creditors. Amongst unsecured creditors also there can be sub-classes.
Amongst unsecured creditors, some may be preferred like the Government, or the workers who may have a statutory preference over others. It is difficult to enumerate the circumstances under which different creditors, secured or unsecured, would form a separate sub-class. But, the general principle would be the same, namely, whether the interest of the creditors who claim to belong to a different class are so dissimilar to the interest of the other creditors that it would be impossible for them to sit and consult together and take a common view of their common interest.
Maneckchowk & Ahmedabad Mfg. Co. Ltd., In re [1970] 40 Comp. Cas. 819 (Guj.)
A ‘class’ of creditors must be confined to those persons whose rights are not so dissimilar as to make it impossible for them to consult together with a view to their common interest. Speaking very generally in order to constitute a class, members belonging to the class must form a homogeneous group with commonality of interest.
Sovereign Life Assurance Co. v. Dodd [1892] 2 QB 573 (CA)
The word ‘class’ is vague and to find out what is meant by it, one must look at the scope of the section, which is a section enabling the Court to order a meeting of a class of creditors to be called. It seems plain that one must give such a meaning to the term ‘class’ as will prevent the section being so worked as to result in confiscation and injustice, and that it must be confined to those persons whose rights are not so dissimilar as to make it impossible for them to consult together with a view to their common interest.
‘Commencement of winding up’/ of the 2013 Act BPL Ltd. v. Inter Modal Transport Technology Systems Ltd. [2002] 35 SCL 773/[2001] 107 Comp. Cas. 313 (Kar.)
Having regard to the provision for relating back contained in section 441 of the 1956 Act [corresponding to of the 2013 Act], the words ‘commencement of the winding up’ occurring in section 537(1)(a) of the 1956 Act [corresponding to of the 2013 Act] refer to the time of presentation of the petition for winding up and not the date of order of winding up, where the winding up order is passed under section 433 of the 1956 Act [corresponding to of the 2013 Act].
‘Commission’/ of the 2013 Act Madanlal Fakirchand Dudhediya v. Shree Changdeo Sugar Mills Ltd. [1962] 32 Comp. Cas. 604 (SC)
The word ‘commission’ used in clauses (i) to (iii) of section 76(1) of the 1956 [corresponding to of the 2013 Act] seems to refer to commission paid not only out of capital but also out of profits in relation to debentures.
‘Company’/ of the 2013 Act Bangalore Timber Industries v. Madras Sapper Ex-Servicemen’s Rehabilitation Association [1990] 68 Comp. Cas. 641 (Kar.)
The word ‘company’ as it occurs in section 237 of the 1956 Act [corresponding to of the 2013 Act] is only relatable to a company which is covered by section 235 of the 1956 Act [corresponding to of the 2013 Act].
‘Company’/ of the 2013 Act Rossell Industries Ltd., In re [1995] 6 SCL 79/[1998] 91 Comp. Cas. 333 (Cal.)
The expression ‘company’ used in section 390 of the 1956 Act [corresponding to of the 2013 Act] applies to all companies which can be wound up and is not restricted to only those companies which are in a position to be wound up as on the date of making application under to [corresponding to to of the 2013 Act] and, as such on the date of making of application for merger or amalgamation, company may be quite prosperous and a profit making company.
‘Company’/ of the 2013 Act Vail Pattabhirama Rao v. Sri Ramanuja Ginning & Rice Fac-tory (P.) Ltd. [1986] 60 Comp. Cas. 568 (AP)
The word ‘company’ occurring in section 253 of the 1913 Act/565 of the 1956 Act [corresponding to of the 2013 Act] is not a company registered under the Act. It is used in the sense of a group, assembly or association of persons.
Salim Akbarali Nanji v. Union of India [2003] 48 SCL 1/113
Comp. Cas. 141 (Bom.)
The word ‘company’ occurring in section 566 of the 1956 Act is not a company registered under the Companies Act. It may include within its purview a co-operative society registered under the Societies Act or the Multi-State Act.
‘Consent’/ of the 2013 Act Walchandnagar Industries Ltd. v. Ratanchand Khimchand Motishaw [1953] 23 Comp. Cas. 343 (Bom.)
‘Consent’ as occurring in section 297(1) of the 1956 Act [corres-ponding to of the 2013 Act] implies a knowledge of the necessary facts and materials which leads to the consent.
‘Consideration for charge’/ of the 2013 Act Yeovil Glove Co. Ltd., In re [1964] 34 Comp. Cas. 847 (CA)
The word ‘consideration’ occurring in section 322 of English Companies Act, 1948/section 534 of the 1956 Act [corresponding to of the 2013 Act] can neither be construed in its strict sense nor in technical sense. The expression ‘in consideration for the charge’ means in this context ‘in consideration of the fact that the charge exists’, and that the relevant question of fact is whether the payments subsequently made would have been made if the charge had not been given.
The words ‘in consideration of’ occurring in section 322 of the English Companies Act, 1948/section 534 of the 1956 Act mean ‘by reason of’ or ‘having regard to the existence of’ the charge.
‘Continuing offence’as generally defined Hyderabad Vanaspathi Ltd. v. Registrar of Companies [1986] 59 Comp. Cas. 654 (AP)/State of Bihar v. Deokaran Nenshi AIR 1973 SC 908
Continuing offence is one which is susceptible of continuance and is distinguishable from the one which is committed once and for all. It is one of those offences which arises out of a failure to obey or comply with a rule or its requirement and which involves a penalty, the liability for which continues until the rule or its requirement is obeyed or complied with. On every occasion that such disobedience or non-compliance occurs and recurs, there is an offence committed.
‘Contract’/ of the 2013 Act A.B.C. Coupler & Engg. Co. Ltd. (No. 3), In re [1970] 40 Comp. Cas. 952 (Ch. D)
The word ‘contract’ in sub-section (4) of section 323 of the English Companies Act, 1948/Section 535(1)(d) of the 1956 Act [corresponding to of the 2013 Act] does not include a lease.
‘Contribution’/ of the 2013 Act Graphite India Ltd. v. Dalpat Rai Mehta [1978] 48 Comp. Cas. 683 (Cal.)
In West’s publication of ‘Words and Phrases’ the word ‘contribution’ has been defined, inter alia, as giving money or other aid for a specified object. In other words, a contribution is an aid or payment without any consideration. Admittedly, payment for the insertion of an advertisement cannot be deemed to be a contribution as some benefit by way of publicity is being derived. By the advertisement the petitioner-company drew the attention of the public towards their products with the ultimate object of selling or marketing them. (See section 293A of the 1956 Act [corresponding to of the 2013 Act]).
‘Contributories’/ of the 2013 Act Raja Surrindar Singh v. P.B. & A. Products Co. Ltd. [1956] 26 Comp. Cas. 41 (Pepsu)
The word ‘contributories’ in section 166 of the 1913 Act/section 439 of the 1956 Act [corresponding to of the 2013 Act] includes a fully paid-up shareholder, and since no limitation in this connection is placed by the section itself one need not allege or prove that, in case of winding up, there will be substantial surplus for distribution among the shareholders.
Bayswater Trading Co. Ltd., In re [1970] 40 Comp. Cas. 1196 (Ch. D)
The word ‘contributory’ in section 224(1) of the English Act, 1948/section 439 of the 1956 Act [corresponding to of the 2013 Act] must be construed in a way so as to extend to personal representative of a deceased shareholder.
‘Contributory’/ of the 2013 Act Gulzari Lal Bhargava v. Official Receiver-cum-Official Liquida-tor, Ammonia Supplies Corpn. (P.) Ltd. [1972] 42 Comp. Cas. 401 (Delhi)
The term ‘contributory’ in section 556(1) of the 1956 Act [corres-ponding to of the 2013 Act] includes a holder of shares.
‘Contributory’/ of the 2013 Act Superintendent of Central Excise & Customs v. Sri Vishnupriya Industries Ltd. (In Liquidation) [2010] 97 SCL 27 (AP)(FB)
The word contributory is defined under section 428 of the 1956 Act [corresponding to of the 2013 Act] and by no stretch of imagination, the customs department can be brought under the definition of ‘contributory’.
‘Cost, charges and expenses’/ and of the 2013 Act ITO v. Official Liquidator, Swaraj Motors (P.) Ltd. [1978] 48 Comp. Cas. 11 (Ker.)
The expression ‘costs, charges and expenses’ referred to in sections 476 and 520 of the 1956 Act [corresponding to and of the 2013 Act] are very general. In this will come the cost of repairs, payment of rent and tax, cost of preservation of any property, cost of realisation including costs of litigation and all expenses incurred with the leave of the Court in the winding up. Income-tax which became payable at the winding up also is an expense in the winding up. Income-tax is a necessary consequence of the acts performed by the liquidator in the course of the liquidation for the purpose of realising, the assets of the company.
‘Created’/ of the 2013 Act T.R. Tyagarajan v. Official Liquidator [1960] 30 Comp. Cas. 481 (Mad.)
The word ‘created’ as occurring in section 125(1) of the 1956 Act [corresponding to of the 2013 Act] does not include in its meaning ‘accepted’.
‘Creditor’/ of the 2013 Act Seksaria Cotton Mills Ltd. v. A.E. Naik [1967] 37 Comp. Cas. 656 (Bom.)/Uma Investments (P.) Ltd., In re [1977] 47 Comp. Cas. 242 (Bom.)
The word ‘creditor’ as occurring in section 391 of the 1956 Act [corresponding to of the 2013 Act] when used in the context of winding up proceedings is not confined to a person who is entitled to recover a specific debt from the company-in-liquidation. The word has a much wider meaning. It is not necessary that a person, in order that he may be a ‘creditor’ in liquidation proceedings, should have an ascertained amount payable by the company. He is a ‘creditor’ even if he has against the company a claim, present or future, certain or contingent, ascertained or sounding only in damages.
‘Creditor’/ of the 2013 Act Harvest Lane Motor Bodies Ltd., In re [1969] 39 Comp. Cas. 961 (Ch. D.)
In using the word ‘creditor’ simpliciter [in section 560(6) of the 1956 Act (corresponding to of the 2013 Act)] the Legislature cannot have been intending thereby to differentiate between those creditors whose debts are fixed and ascertained and those whose debts are contingent or prospective, providing redress for the grievances of the former but ignoring the grievances of the latter. The word ‘creditor’ is wide enough to include a person whose debt is contingent or prospective.
‘Creditor’/ of the 2013 Act State of Andhra Pradesh v. Hyderabad Vegetable Products Co. Ltd. [1962] 32 Comp. Cas. 64 (AP)
The term ‘creditor’ as occurring in section 439(1)(b) of the 1956 Act [corresponding to of the 2013 Act] is not limited to one to whom a debt is due at the date of the petition and who can demand immediate payment. Every person having a pecuniary claim against the company, whether actual or contingent, is a creditor.
Kudremukh Iron Ore Co. Ltd. v. Kooky Roadways (P.) Ltd. [1990] 69 Comp. Cas. 178 (Kar.)
Word ‘creditor’ in clause (b) of sub-section (1) of section 439 of the 1956 Act can be understood as a person to whom a debt is payable.
‘Death’/ of the 2013 Act Severn Trent Water Purification Inc. v. Chloro Controls (India) (P.) Ltd. [2008] 142 Comp. Cas. 81/82 SCL 435 (SC)
The phrase ‘or have devolved on him through the death of former holder’ in section 439(4)(b) of the 1956 Act [corresponding to of the 2013 Act] would apply to natural persons who are holding shares in their individual capacity and not to juristic entities. The word ‘death’ mentioned in a statute normally refers to the ceasing of life of a natural person. In the context of company law, winding up of a body corporate is not the same thing as or equivalent to death of a member. An individual and a body corporate expressly have been treated separately.
‘Debenture’/ of the 2013 Act Chief Controlling Revenue Authority v. Manager, State Bank of Mysore [1989] 65 Comp. Cas. 427 (Kar.)(FB)
Meaning of the term ‘debenture’ as occurring in section 2(12) of the 1956 Act [corresponding to of the 2013 Act] is still obscure. Debenture is one of the means of raising funds by any one but generally by companies in the interest of trade, commerce and industry.
‘Debt’/ of the 2013 Act NEG Micon v. NEPC India Ltd. [2001] 34 SCL 210/[2004] 120 Comp. Cas. 784 (Mad.)
The word ‘debt’ used in clause (e) of section 433 of the 1956 Act [corresponding to of the 2013 Act] has to be understood in a practical and pragmatic sense. It is only when a debt becomes absolutely due in the sense that the creditor is entitled to its payment presently, when there is a relationship of a debtor and a creditor.
Madhur Food Refrigeration v. Roadmaster Foods Ltd. [2000] 27 SCL 516 (Punj. & Har.)
The expression ‘debt’ has been given a wider meaning and would obviously include a claim by creditor based on documents.
Newfinds (India) v. Vorion Chemicals & Distilleries Ltd. [1976] 46 Comp. Cas. 87 (Mad.)
A statutory definition of ‘debt’ is contained in section 434(1)(c) of the 1956 Act [corresponding to of the 2013 Act] which clearly means a definite sum. Therefore, it cannot be contended that the debt also includes any unliquidated damages or a sum of money capable of being ascertained.
Registrar of Companies v. Kavita Benefit (P.) Ltd. [1978] 48 Comp. Cas. 231 (Guj.)
A debt is a sum of money which is now payable or will become payable in future by reason of a present obligation.
People v. Arguello [1869] 37 Calif 521
Standing alone, the word ‘debt’ is applicable to a sum of money which has been promised at a future day as against a sum now due and payable. If one wishes to distinguish between the two, one can say of the former that it is a debt owing, and of the latter that it is a debt due. In other words, debts are of two kinds: solvendum in praesenti and solvendum in futuro…. A sum of money which is certainly and in all events payable is a debt, without regard to the fact whether it be payable now or at a future time. A sum payable upon a contingency, however, is not a debt, or does not become a debt, until the contingency has happened.
Greenhills Exports (P.) Ltd. v. Coffee Board [2001] 34 SCL 717 (Kar.)
It is now well-settled that where the amount claimed is damages, either for breach of a contract or in tort, it is not a ‘debt’ due and, therefore, a company petition will not be maintainable under section 433(e) of the 1956 Act.
‘Damages’ is what is awarded in law for an injury or wrong as a consequence of a breach of contract or tortuous act and it includes all amounts which an aggrieved party may recover under law; on the other hand, the term ‘debt’ refers to an ascertained sum due or a sum which is capable of being ascertained; and, therefore, a claim for damages is not a claim for a debt.
The principles that may be culled out from judicial decisions are as follows:
(i) ‘A debt’ is a sum of money which is now payable or will become payable in future by reason of a present obligation. The existing obligation to pay a sum of money is the sine qua non of a debt. ‘Damages’ is money claimed by, or ordered to be paid to, a person as compensation for loss or injury. It merely remains a claim till adjudication by a court and becomes a ‘debt’ when a court awards it.
(ii) In regard to a claim for damages (whether liquidated or unliquidated), there is no ‘existing obligation’ to pay any amount. No pecuniary liability in regard to a claim for damages, arises till a court adjudicates upon the claim for damages and holds that the defendant has committed breach and has incurred a liability to compensate the plaintiff for the loss and then assess the quantum of such liability. An alleged default or breach gives rise only to a right to sue for damages and not to claim any ‘debt’. A claim for damages becomes a ‘debt due’ not when the loss is quantified by the party complaining of breach, but when a competent court holds an enquiry, that the person against whom the claim for damages is made, has committed breach and incurred a pecuniary liability towards the party complaining of breach and assess the quantum of loss and awards damages. Damages are payable on account of a fiat of the court and not on account of quantification by the person alleging breach.
(iii) When the contract does not stipulate the quantum of damages, the court will assess and award compensation. Where the contract stipulates the quantum of damages or amounts to be recovered as damages, then the party complaining of breach can recover reasonable compensation, the stipulated amount being merely the outside limit.
(iv) When a contract provides that on default by a buyer to pay for and take delivery of goods, the seller is entitled to recover the loss incurred on resale, interest on delayed recovery of the price, godown charges, insurance charges and other expenses incurred by the seller till resale, it cannot be said that the buyer incurs the liability to pay those amounts, automatically, when he fails to take deli-very. Failure to take delivery may be due to several valid or lawful reasons which may show that the failure to take delivery is not a default or ‘breach’ in which event, no pecuniary liability may fasten on him.
(v) Even if the loss is ascertainable and the amount claimed as damages has been calculated and ascertained in the manner stipulated in the contract, by the party claiming damages, that will not convert a claim for damages into a claim for an ascertained sum due. Liability to pay damages arises only when a party is found to have committed breach. Ascertainment of the amount awardable as damages is only consequential.
Priyaraj Electronics Ltd. v. Motorola India (P.) Ltd. [2009] 92 SCL 263 (Punj. & Har.)
The Act again does not make any specific reference as to whether the debt shall be a debt already owed by the company or it could even be a debt payable in future by the company. In a case where the liability is contingent, it cannot be said to be ‘debt owed’ by the company. The ‘debt payable’, on the other hand, could be even a contingent liability. Concise Law Dictionary 2004 edition defines the term ‘payable’ as having two meanings : (1) owing and (2) payable at a particular point of time, and when this expression is used without any qualification, it generally means payable at once. This assumes importance only because a petition for winding up under the Act could be invoked only for an amount that is ascertained and owned by the company. That is why there is a statutory requirement of having to issue a notice. In case where a creditor complains that the company is unable to pay its debts, the presumption is available under section 434(1)(a) of the 1956 Act [corresponding to of the 2013 Act] if the company is indebted in a sum exceeding one lakh rupees and company is unable to pay for three weeks after the demand is made. The ‘sum due’ as referred to under section 434 of the 1956 Act must, therefore, mean what has fructified and cannot merely be a contingent liability or deferred payment.
‘Deemed’/ of the 2013 Act A.C. Goel v. First National Bank Ltd. [1960] 30 Comp. Cas. 317 (Punj.)
The word ‘deemed’ as occurring in section 441(1) of the 1956 Act [corresponding to of the 2013 Act] means ‘supposed’, ‘considered’, ‘construed’, ‘thought’, ‘taken to be’, or ‘presumed’. The word ‘deemed’ refers to ‘what is supposed to be’ not to ‘what actually is’.
Rishabh Agro Industries Ltd. v. P.N.B. Capital Services Ltd. [2000] 25 SCL 461/101 Comp. Cas. 284 (SC)
The word ‘deemed’ used in section 441 of the 1956 Act would mean, ‘supposed’, ‘considered’, ‘construed’, ‘though’, ‘taken to be’ or ‘presumed’. The words ‘shall be deemed to commence’ in section 441 of the 1956 Act clearly show the intention of the Legislature that, although the winding up of a petition does not, in fact, commence at the time of presentation of the petition itself, yet it shall be presumed to commence from that stage.
‘Default’/ of the 2013 Act Nazamunnessa Begum v. Vidya Sagar Cotton Mills Ltd. [1963] 33 Comp. Cas. 36 (Cal.)
Default is a purely relative term, just like negligence. It means nothing more, nothing less, than not doing what is reasonable under the circumstances – not doing something which one ought to do.
Hemendra Prasad Barooah v. Bahadur Tea Co. (P.) Ltd. [1991] 70 Comp. Cas. 792 (Gauhati)
The word ‘default’ as occurring in section 155/111(4)(b) of the 1956 Act [corresponding to of the 2013 Act] means ‘omission or failure to perform a legal or contractual duty’, and the meaning of the word ‘refuse’ is ‘declination of a request or demand, or omission to comply with some requirement of law’.
‘Delegation’/ of the 2013 Act Huth v. Clarke [1890] 25 QBD 391
The word ‘delegation’ as occurring in section 292(1) of the 1956 Act [corresponding to of the 2013 Act] implies that powers are committed to another person or body which are as a rule always subject to resumption by the power delegating. Delegation does not imply a denudation of power and authority, and unless it is controlled by statute, the delegating power can at any time resume its authority. The word ‘delegation’ does not imply parting with powers by the person who grants the delegation, but points rather to the conferring of an authority to do things which otherwise that person would have to do himself. The best illustration of the word is afforded by the maxim, delegation non potest delegare; it is never used as implying that the delegating person parts with the power in such a manner as to denude himself of his rights.
‘Direct that any person shall attend. . . examined’/ of the 2013 Act Indian States Bank Ltd., In re [1933] 3 Comp. Cas. 263 (All.)
The wording of the Act, which is that the Court may ‘direct that any person shall attend before the Court. . . . and be publicly examined’ as occurring in section 196 of the 1913 Act/section 478(1) of the 1956 Act [corresponding to of the 2013 Act], does not justify the Court, on a general allegation of fraud in the management of the company, in making an order for the public examination of ‘any person’ not directly implicated in the application of the Official Liquidator. Justice demands that the person against whom there is an allegation of fraud should be clearly named and some facts stated in application itself to show that a prima facie case exists against that person.
‘Direction given by Court’ generally defined Commercial Art Engravers (P.) Ltd. v. Indian & Eastern Newspa-pers Society [1978] 48 Comp. Cas. 36 (Bom.)
As defined in Webster’s Third New International Dictionary, the expression ‘direct’ means : ‘To prescribe especially by formal or mandatory instruction or legal enactment (a Court ordering that the person be brought to a Court hearing). (Postal Inspectors directed to destruction of the obscene matter).’
The word ‘direction’ has to be construed accordingly. So construed it would mean instructions given by a Court. The said dictionary, therefore, says that ‘direction’ means ‘something that is imposed as authoritative instruction or bidding’. In the said dictionary the word ‘direction’ is held as synonymous with ‘order’ and ‘command’. It, therefore, follows that the direction like an order is command of the superior authority. Direction given by a Court, therefore, is a judicial order, a command of the judicial authority. Neither conceptually nor in point of law, can there be any distinction between the direction given by a Court or the orders passed by it.
‘Disposition’/ of the 2013 Act Prudential Capital Markets Ltd. (In Liquidation), In re [2007] 140 Comp. Cas. 754/[2008] 84 SCL 239 (Cal.)
Disposition of properties and effects made by a company after the commencement of winding up is covered by section 536(2) of the 1956 Act [corresponding to of the 2013 Act] and it is for such reason that the word ‘transfer’ is used in sections 531(1) and 531A of the 1956 Act [corresponding to and of the 2013 Act] and the word ‘disposition’, an expression of wider import, is used in section 536(2) of the 1956 Act.
If transfers of company’s assets brought about by scheming minds in anticipation of imminent winding up proceedings being launched can be undone under sections 531(1) and 531A of the 1956 Act, there ought to be stricter control over transactions involving a company after winding up proceedings against it has commenced. There is surely a different meaning that the Legislature intended to convey by using the word ‘disposition’ in section 536(2) of the 1956 Act while the word ‘transfer’ has been used in sections 531(1) and 531A of the 1956 Act. As section 536(2) of the 1956 Act operates during the time when winding up proceedings are pending, the legislative intent of using a different expression becomes clearer. ‘Disposition’ under section 536(2) of the 1956 Act would cover a wider range of transactions than ‘transfer’ under section 531(1) or section 531A of the 1956 Act would cover.
‘Disqualified’/ of the 2013 Act Cricket Club of India Ltd. v. Madhav L. Apte [1975] 45 Comp. Cas. 574 (Bom.)
The word ‘disqualified’ used in sub-section (3) of section 274 of the 1956 Act [corresponding to of the 2013 Act] must be understood in its plain natural meaning, which in the context would be ‘not qualified’ and not in the limited sense as restricted to some incapacity as a result of defect, unfitness or blemish.
‘Dividend’/ of the 2013 Act Motor Fin. (P.) Ltd. v. Registrar of Companies [1970] 40 Comp. Cas. 6 (AP)
The term ‘dividend’ as occurring in section 555(1)(a) of the 1956 Act [corresponding to of the 2013 Act] has to be interpreted according to the context. Section 555(1)(a) of the 1956 Act contemplates dividends which are declared and remain unpaid.
‘Due’/’Having become due and payable’/ of the 2013 Act STO v. Rajratna Naranbhai Mills Co. Ltd. [1974] 44 Comp. Cas. 65 (Guj.)
The word ‘due’ as occurring in section 530(1)(a) of the 1956 Act [corresponding to of the 2013 Act] implies or conveys different meanings in the juxtaposition in which it is used in the two parts of the same clause. The word ‘due’ in the first part of the clause could only mean ‘outstanding at the relevant date’. If the debt for the payment of which priority is claimed was not outstanding at the relevant date, there is no question of claiming priority in payment of that amount. Therefore, when it is said that the amount in respect of which priority is claimed must be due at the relevant date, the only meaning one can give to it is that it must be outstanding at the relevant date.
Latter part of the clause reads ‘having become due and payable within the twelve months next before the date’. In the field of tax laws, it is a well-known phenomenon that tax becomes due at certain time and becomes payable at some other point of time. It may become due and payable simultaneously. It may as well become due at one time and payable at some other point of time. Upon a true construction of sub-clause (a) priority can be claimed in respect of that amount which must fall within one of the nomenclatures set out in the sub-clauses and which must be outstanding at the relevant date and the amount becomes due, meaning thereby that the incident occurred which made the amount due and it became also payable within 12 months next before the relevant date. ‘Having become due and payable’ would literally mean that process or event of bringing liability into existence has occurred and fastened the liability for its being discharged. Both the events must occur within twelve months next before the relevant date.
‘Having become due’ indicates the tense used which would indicate the process of becoming due. At first blush one feels that the legislature was guilty of tautology in saying that debt must be due and payable because debt is either payable in praesenti or in futuro, if a date for payment is fixed and debt due is necessarily payable. But, on deeper examination of the sub-clause, the legislative intent becomes quite manifest. The amount may be outstanding and payable by the company at the relevant date but that amount may be outstanding for a long time prior to the relevant date, or, for a period preceding 12 months next before the relevant date. Such amount would undoubtedly be due from the company at the relevant date. In respect of such an amount the first part of the clause would necessarily be satisfied but before priority could be claimed and granted, it will have to be found out whether that debt which was outstanding at the relevant date became due, meaning thereby that the event which brought debt into existence occurred within 12 months and also it became payable, meaning thereby its payment could have been enforced against the company within 12 months. Three specific conditions are prescribed in sub-clause (a) and all the three must co-exist and be satisfied in respect of any particular debt for which priority is claimed before priority in payment can be accorded to it. These three conditions are :
(i) debt of the kind mentioned in clause (a) must be outstanding on the relevant date;
(ii) the debt must have become due, in the sense, it must have been incurred at any time within 12 months next before the relevant date; and
(iii) the debt must have become payable at any time within 12 months next before the relevant date.
Analysing the section, these three conditions emerge and all the three must be satisfied and the debt must be in respect of revenues, taxes, cesses and rates and debt must be due to the Central or State Government or a local authority.
‘Expenses incurred in winding up’/ of the 2013 Act Beni Felkai Mining Co., In re [1934] 4 Comp. Cas. 293 (Ch. D)
There is no particular reason for limiting the meaning of the phrase ‘expenses of the liquidation’ or ‘expenses incurred in the winding up’ as occurring in section 520 of the 1956 Act [corres-ponding to of the 2013 Act]. The term is not one of art, and there is no reason why it should not include any expenses which the liquidator might be compelled to pay in respect of his acts in the course of a proper liquidation of the company’s assets. The sum due on account of income-tax are sums which can be properly treated as expenses in the liquidation.
‘Floating charge’/ of the 2013 Act Calcutta Tramways Co. Ltd. v. CWT [1972] 42 Comp. Cas. 555 (SC)
The terms ‘floating security’ and ‘floating charge’ as occurring in section 534 of the 1956 Act [corresponding to of the 2013 Act] mean a security or charge which is not to be put into immediate operation, but is to float so that the company is to be allowed to carry on its business. It contemplates, for instance, that book debts may be extinguished by payment, and other book debts may come in and take the place of those that have dis-appeared. While a specific charge is one that, without more, fastens an ascertained and definite property or property capable of being ascertained and defined, a floating charge moves with the property which it is intended to affect, until some event occurs or some act is done which causes it to settle and fasten on the subject of the charge within its reach and grasp.
It is of the essence of a floating charge that it remains dormant until the undertaking charged ceases to be a going concern, or until the person in whose favour the charge is created intervenes. His right to intervene may be suspended by agreement, but if there is no such agreement he may exercise his right whenever he pleases after default.
‘For the adjustmentof rights of contribu-tories’/ and of the 2013 Act Bombay Chlorine Products Ltd., In re [1965] 35 Comp. Cas. 282 (Bom.)
The plain meaning of the phrase ‘for the adjustment of the rights of the contributories’ as appearing in sections 156 and 187 of the1913 Act/sections 426 and 470(1)(a) of the 1956 Act [corresponding to & of the 2013 Act] must be adjustment of such rights as are vested in different classes of shareholders under the memorandum of association and the articles of association of a company. If the enforcement of these rights necessitates a call being made, the Court would be justified, having regard to the language of sections 156 and 187 of 1913 Act, in making an order for call. The question in each case must be first to ascertain the rights of shareholders of different classes and also shareholders in single class. The next question would be, how to enforce these different rights of different shareholders and, if necessary, to make a call for adjustment of these rights.
‘Four months’/ ofthe 2013 Act Western Mfg. (Reading) Ltd., In re [1957] 27 Comp. Cas. 144 (Ch.D.)
‘Four months’ is the maximum period within which the offer is to be accepted; section 395(1) of the 1956 Act [corresponding to of the 2013 Act] does not require that the offer must be kept open for at least four months.
‘Held and conducted’/ of the2013 Act R. Rangachari v. S. Suppiah [1975] 45 Comp. Cas. 641 (SC)
The use of the word ‘and’ between the words ‘held’ and’ conducted’ in clause (a) of sub-section (1) of section 186 of the 1956 Act [corresponding to of the 2013 Act] clearly shows that the Court has no power to make any order regarding the holding and conducting of any meeting which has already been called, without ordering a meeting of the company to be called in place of the meeting already called.
If an order under clause (a) has been made such ancillary or consequential directions as the court thinks expedient could be given under clause (b), including a direction within the meaning of the Explanation appended thereto. The language of sub-section (2) further fortifies the above interpretation of sub-section (1) and makes any meeting called, held and conducted in accordance with an order under sub-section (1) to be a meeting of the company duly called, held and conducted. The use of the word “or” in the first part of sub-section (1) may be disjunctive or conjunctive in the manner interpreted above. But, undoubtedly, the order under clause (a) has got to be for all the three purposes and not merely for holding or conducting of the meeting.
‘Holder of share’ asgenerally defined Howrah Trading Co. Ltd. v. CIT [1959] 29 Comp. Cas. 282 (SC)
The scheme of the Act shows that the words ‘member’, ‘share-holder’ and ‘holder of a share’ have been used interchangeably in that Act. The words ‘holder of a share’ are really equal to the word ‘shareholder’, and the expression ‘holder of a share’ denotes, insofar as the company is concerned, only a person who, as a shareholder, has his name entered in the register of members.
‘Holder of shares’/ of the 2013 Act Kedar Nath Agarwal v. Jay Engg. Works Ltd. [1963] 33 Comp. Cas. 102 (Cal.)
A ‘member’ may be a ‘holder’ of shares but a ‘holder’ may not be a ‘member’. A person whose name is on the register may have sold his shares and from the moment his property in the shares has passed to his purchaser he has ceased to be a ‘holder’ of those shares. [See section 81(1)(a) of the 1956 Act]
‘Impracticable’/ of the 2013 Act Pasari Flour Mills Ltd., In re [1962] 32 Comp. Cas. 896 (MP)/E1. Sombrero Ltd., In re [1958] 3 All ER 1 (Ch. D)/Shrimati Jain v. Delhi Flour Mills Co. Ltd. [1974] 44 Comp. Cas. 228 (Delhi)/Motion Pictures Association, In re [1974] 44 Comp. Cas. 298 (Delhi)
Since the word ‘impracticable’ as occurring in section 186(1) of the 1956 Act [corresponding to of the 2013 Act] is more limited than the word ‘impossible’, the position comes to this : Examine the circumstances of the particular case and answer the question whether, as a practical matter, the desired meeting can be conducted, there being no doubt, of course, that it can be convened and held.
Bengal & Assam Investors Ltd. v. J.K. Eastern Industries (P.) Ltd. [1957] 27 Comp. Cas. 86 (Cal.)
The word ‘impracticable’ appearing in section 186(1) of the 1956 Act must certainly be given a practical meaning. It must be understood to be impracticable from the business point of view. It must not be held impracticable on the slightest excuse that the directors cannot agree.
‘In case of windingup’/ of the 2013 Act Kamani Metallic Oxides Ltd. v. Kamani Tubes Ltd. [1984] 56 Comp. Cas. 19 (Bom.)
The opening words of section 536(2) of the 1956 Act [corresponding to of the 2013 Act]. ‘In the case of winding up’ does not mean ‘after the winding up order is passed’ or ‘upon passing such order’. It means ‘during winding up proceedings’, which admittedly commence on the date on which the petition for winding up is filed.
‘In course of winding up a company’/ of the 2013 Act Vemuri Parandhajniah v. R. Narasimha Rao [1950] 20 Comp. Cas. 1 (Mad.)
The expression ‘in the course of winding up a company’ in section 235 of the 1913 Act/section 543(1) of the 1956 Act [corresponding to of the 2013 Act] refers to all the three modes in which a company can be wound up and, therefore, the course of winding up a company might have arisen by any of the modes indicated in the said Act.
Vishwa Pal Sharma v. Sukh Sancharak Co. (P.) Ltd. [1962] 32 Comp. Cas. 947 (All.)
The words ‘in the course of winding up’ in section 235(1) of the 1913 Act must relate to a point of time subsequent to the making of the order of winding up, although it may be that the appointment order of liquidator is contained in the same order by which the winding up is made.
‘Indirectly’/ of the 2013 Act Dr. Fredie Ardeshir Mehta v. Union of India [1991] 70 Comp. Cas. 210 (Bom.)
The word ‘indirectly’ in section 295(1) of the 1956 Act [corres-ponding to of the 2013 Act] cannot be read as converting what is not a loan into a loan.
‘Information with respect to its affairs which they might reasonably expect’/ of the 2013 Act Kumaranunni v. Mathrubhumi Printing & Publishing Co. Ltd. [1983] 54 Comp. Cas. 370 (Ker.)
When section 237(b)(iii) of the 1956 Act [corresponding tosection of the 2013 Act] speaks of ‘information with respect to its affairs which they might reasonably expect’, it means the information sought for must be about the affairs of the company and something which could reasonably be expected to be supplied.
Insolvency, connotation of European Life Assurance Society, In re [1869] 9 Eq. Cas. 122
Insolvency is not in any technical sense but, plainly and commercially insolvent – that is to say, that its assets are such, and its existing liabilities are such, as to make it reasonably certain – as to make the court feel satisfied – that the existing probable assets would be insufficient to meet the existing liabilities.
‘Insolvent company’/ of the2013 Act K. Saradambal v. Jagannathan & Bros. [1972] 42 Comp. Cas. 359 (Mad.)
Though the expression ‘insolvent company’ in section 529(1) of the 1956 Act [corresponding to of the 2013 Act] is not defined, obviously, it refers to a company which has been ordered to be wound up on a petition founded upon section 433(e) of the 1956 Act, that is, the company being unable to pay its debts.
‘Interest’/ of the 2013 Act Mukkattukara Catholic Co. Ltd. v. M.V. Thomas [1995] 6 SCL 135/[1999] 96 Comp. Cas. 864 (Ker.)
The word ‘interest’ as occurring in sections 299(1) and 300(1) of the 1956 Act [corresponding to of the 2013 Act] means personal interest and not official or other interest. But it is not limited to financial interest only and may include interest arising out of fiduciary duties or closeness of relationship. In other words, the interest should be an ‘interest’ conflicting with duty as director.
Clarification issued by the Department of Company Affairs
Regarding the interpretation of the word ‘interest’ in sub-section (1) of section 299 of the 1956 Act [corresponding to of the 2013 Act], the principle is that the contract or arrangement hit by the section is the one in which the director has personal interest conflicting with his duties towards the company as its director. Even where the director himself has no personal interest in any contract or arrangement but any of his relatives has, the director would be deemed to be indirectly interested within the meaning of section 299 of the 1956 Act [corresponding to of the 2013 Act].
‘Interest’/ of the 2013 Act Hindustan Lever Employees’ Union v. Hindustan Lever Ltd. [1994] 2 SCL 157/[1995] 83 Comp. Cas. 30 (SC)
Section 393(1)(a) of the 1956 Act [corresponding to of the 2013 Act] requires particulars to be given of any material interests of some person connected with the company, including the directors and managing director. The interest contemplated in this section is interest material for consideration of the scheme by the shareholders.
‘Is being carriedon’/ of the 2013 Act Coimbatore Spg. & Wvg. Co. Ltd. v. M.S. Srinivasan [1959] 29 Comp. Cas. 97 (Mad.)
The expression ‘is being carried on’ occurring in sub-section (7) of section 234 of the 1956 Act [corresponding to of the 2013 Act] relates to the state of affairs at the time the representation to the Registrar is made and not to something which is a matter of past history.
‘Is instituted’, ‘arises’ or ‘is made’/ of the 2013 Act Osier Electric Lamp Mfg. Co. Ltd., In re [1967] 37 Comp. Cas. 306 (Cal.)
The words ‘is instituted’, ‘arises’ or ‘is made’ in section 446 of the 1956 Act [corresponding to of the 2013 Act] suggest that such a suit or claim or application was made after the date of winding up of the company.
‘Issued’as generally defined Nash v. Lynde [1929] AC 158 (HL)
Though the word ‘issue’ is not defined in the Act, it must be noticed that in dealing with such a subject-matter, the Legislature invariably uses in many places the idiom of company business. In connection with the issue of a prospectus, the word does not mean mere delivery. It is difficult to think of a prospectus being issued without some measure of publicity, however modest, and it is impossible to do so, unless the steps taken are with the intention of inducing a subscription by the person invited to subscribe for the securities. The term is not satisfied by a single private communication between friends even if they are business friends, or even though preparations have been made for other documents to be used in other communications if none such takes place.
‘Issued share capital’/ of the 2013 Act Northern Projects Ltd. v. Blue Coast Hotels and Resorts Ltd. [2008] 88 SCL 74 (Bom.)
Preference shares, as their name implies, carry some preferential rights in relation to other class of shares, namely, equity shares. There must be two kinds of shares for one to be preference. This class is given preferential treatment over the other. Section 86 of the 1956 Act [corresponding to of the 2013 Act] deals with kinds of share capital and sub-section (1) of defines preference share capital and sub-section (2) defines equity share capital. Sub-section (1)(a) of section 87 of the 1956 Act [corresponding to of the 2013 Act] deals with voting rights of equity shareholders and sub-section (2)(b) deals with voting rights of preference shareholders. Having regard to the provisions of sections 85, 86 and 87 of the 1956 Act, the expression ‘issued share capital’ in section 399(1) of the 1956 Act [corresponding to of the 2013 Act] can only refer to the share capital which could be issued, i.e., both equity and preference share capital and, therefore, the expression ‘issued share capital’ refers to both preference and equity share capital of the company.
‘Its affairs’/ of the 2013 Act Regina v. Board of Trade [1964] 34 Comp. Cas. 887 (QB)
What are ‘its affairs’ when the company is in full control? They must surely include its goodwill, its profits or losses, its contracts and assets including its shareholding and ability to control the affairs of a subsidiary. [See section 237(b) of the 1956 Act]
‘Judgment’ as generally defined Rama Shankar v. Official Liquidator, Jwala Bank Ltd. [1956] 26 Comp. Cas. 126 (All.)
The word ‘judgment’ does not include the interlocutory order or orders which do not finally determine any of the rights of the parties in controversy.
‘Languages in general use’/ of the 2013 Act Clarification issued by Department of Company Law Adminis-tration
The words ‘language in general use’ in section 147(1)(a) of the 1956 Act [corresponding to of the 2013 Act] are synonymous with local language and English does not come in that category for any State in India.
‘Latest’/ of the 2013 Act Navjivan Mills Co. Ltd., In re [1972] 42 Comp. Cas. 265 (Guj.)
The word ‘latest’ as occurring in section 391(2) of the 1956 Act[corresponding to of the 2013 Act] is always a relative term and should be understood in relation to the date on which the petition is filed.
‘Latest auditor’s report’/ of the 2013 Act Magnaquest Solutions (P.) Ltd., In re [2007] 80 SCL 496/[2008] 141 Comp. Cas. 728 (AP)
Under the proviso to section 391(2) of the 1956 Act [corresponding to of the 2013 Act], the petitioner-company must disclose all material facts, including its latest financial position and the latest auditors’ report on its accounts. The words ‘latest auditors’ report’ connote the latest auditors’ report available or which should normally be available at the time of filing of the petition. There will always be a time gap between the date on which the auditor audits the accounts and prepares his report, the date on which the company petition is filed and the date on which the petition is actually heard. The statutory requirement of submission of the latest auditor’s report, stipulated in the proviso to sub-section (2) of section 391 of the 1956 Act, would mean the latest auditors’ report for the period for which the accounts are audited or ought to have been audited.
‘Liquidator’/ of the 2013 Act L.K. Prabhu v. S.M. Ameerul Millath [2002] 40 SCL 385 (Ker.)
The word ‘liquidator’ used in the first part, the second part and the third part of section 543(1) of the 1956 Act [corresponding to of the 2013 Act] has the same meaning as a liquidator of the company. He will be the Official Liquidator himself in a Court winding up or he may be a liquidator in a voluntary winding up. (See section 543(1) of the 1956 Act [corresponding to of the 2013 Act].)
‘Liquidator v.receiver’ Stead, Hazel & Co. v. Cooper [1933] 3 Comp. Cas. 428 (KB)
The description ‘liquidator’ has a different significance to the description ‘receiver’ and ‘manager’.
‘Loans’/ of the 2013 Act Dr. Fredie Ardeshir Mehta v. Union of India [1991] 70 Comp. Cas. 210 (Bom.)
A loan is defined by the Oxford English Dictionary as ‘a thing lent; something the use of which is allowed for a time, on the understanding that it shall be returned or an equivalent given; esp., a sum of money lent on these conditions and usually with interest’. The essential requirement of a loan is the advance of money (or of some article) upon the understanding that it shall be returned, and it may or may not carry interest. [See section 295 of the 1956 Act]
‘Local limits’/ of the 2013 Act Circular No. 19/72 [F. 8/3(146)/72-CL-V], dated 26-6-1972
The expression ‘local limits’ in section 146(2) of the 1956 Act[corresponding to of the 2013 Act] should be taken to mean both the local body limits and the postal limits, and where the two do not coincide, the wider of the two.
‘Make any interim order that it thinks fit’/ of the 2013 Act NEPC Agro Food Ltd. v. Hindustan Thompson Associated Ltd.[2001] 33 SCL 15 (Mad.)
It cannot be held that section 443(1)(c) of the 1956 Act [corres-ponding to of the 2013 Act] though empowers the court to ‘make any interim order that it thinks fit’ on the hearing the winding up petition, that can be understood and only referable to the proceedings pertaining to the determination of the financial position of the company and to determine whether it should be wound up or not in the interests of the general body of creditors. In the absence of any limitation or restriction in section 443(1) of the 1956 Act itself or elsewhere in the Act, it has to be only taken that the court can pass any order it thinks fit and necessary in the interest of justice and in implementing or giving effect to the provisions of the Act.
‘Matters’/ of the 2013 Act Gokulchand D. Morarka v. Company Law Board [1974] 44 Comp. Cas. 173 (Delhi)
The meaning of the expression ‘in the matter of’ is stated in the Concise Oxford Dictionary to be ‘as regards’. The expression ‘matter’ occurs in the Act in varying contexts. The expressions ‘matter’, ‘matters’ or ‘in the matter of’ as wherever they occur in the Act are of the widest amplitude. There is no force in the contention that orders passed under sections 397 and 398 of the 1956 Act [corresponding to of the 2013 Act] to avoid a winding up are just the contrary of those passed in the matter of winding up and hence, cannot fall within the ambit of the expression ‘in the matter of’.
‘May’/ of the 2013 Act New Central Jute Mills Co. Ltd. v. Deputy Secretary, Ministry of Finance [1966] 36 Comp. Cas. 512 (Cal.)
The word ‘may’ in section 237(a) of the 1956 Act [corresponding to of the 2013 Act] merely confers a liberty upon the Central Government to prescribe the manner in which the report is to be made out.
‘May’/ of the 2013 Act Travancore National & Quilon Bank, In re [1939] 9 Comp. Cas. 14 (Mad.)
The use of the word ‘may’ involves that the Court has to exercise its discretion in making an order under section 153(1) and section 153(2) of the 1913 Act/section 391(1) of the 1956 Act [corresponding to of the 2013 Act] when the scheme comes before the Court for sanction after the approval of the majority of the creditors.
‘May’/ of the 2013 Act New Kerala Chits & Trades (P.) Ltd. v. Official Liquidator [1981] 51 Comp. Cas. 601 (Ker.)/Dundappa Shivalingappa Adi v. S.G. Motor Transport Co. (P.) Ltd. [1966] 36 Comp. Cas. 606 (Mys.)
The word ‘may’ as occurring in section 433 of the 1956 Act [corresponding to of the 2013 Act] makes it clear that the power to wind up a company is discretionary and that there is no right in any one to obtain an order that the company shall be wound up.
Thakar Gobind Singh v. Merchant Mohani Flour Mills Ltd. [1944] 14 Comp. Cas. 184 (Lahore)
The contention that the word ‘may’ should be interpreted as ‘shall’ is altogether unsound.
Smt. P. Sridevi v. Cherishma Housing (P.) Ltd. [2009] 147 Comp. Cas. 130 (AP)
It is not imperative for the Court to make a winding up order even if it forms the opinion that it was just and equitable to do so. The use of the word ‘may’ in section 433 of the 1956 Act creates a further discretion in the Court to order or not to order a winding up. The discretion cannot be exercised arbitrarily or according to one’s own will or whim. It has to be regulated by law and the well-known rules of equity in order to assist the law; allay its rigour; advance the remedy and to relieve against abuse.
‘May’/ of the 2013 Act Manohar Gunaji Anubhawne v. State of Maharashtra [2004] 120 Comp. Cas. 94/52 SCL 536 (Bom.)
The word ‘may’ used in section 630(2) of the 1956 Act [corres-ponding to of the 2013 Act] deserves to be given its plain and grammatical meaning. It may be noted that the offence of wrongfully withholding of property can be in respect of any property of the company whether movable or immovable and it is just possible that by the time the employee is held guilty, he may have already lost, spent, disposed of the movable property given in his possession. In such an eventuality the Court will not be in a position to order the officer or employee to deliver it up or to refund it to the company. The Legislature appears to be alive to such an eventuality and, therefore, purposely used the word ‘may’ instead of the word ‘shall’ in sub-section (2) of section 630 of the 1956 Act. It is, therefore, discretionary and not mandatory upon the Court to pass an order under section 630(2) of the 1956 Act.
‘Meeting’/ of the 2013 Act Sharp v. Dawes [1876-77] 2 QBD 26 (CA)
Unless it is shown that it has a different meaning in the context in which it is used, the word ‘meeting’ prima facie means a coming together of more than one person. [See section 166(1) of the 1956 Act.]
‘Member’/ of the 2013 Act Bayswater Trading Co. Ltd., In re [1970] 40 Comp. Cas. 1196 (Ch.D)
The word any ‘member’ in section 353(6) of the English Act, 1948/section 560(6) of the 1956 Act [corresponding to of the 2013 Act] must be construed as to extend to the personal representative of the deceased member, although not on the register of shareholders.
‘Misfeasance’/ of the 2013 Act Etic Ltd., In re [1880] 14 Ch. D. 660/Kingston Cotton Mill Co.,In re [1896] 1 Ch. 331
‘Misfeasance’ means misfeasance in the nature of a breach of trust, that is to say, it refers to something by which the company’s property has been wasted.
Bholanath Kundu v. Official Liquidator, Bholanath Kundu & Co. (P.) Ltd. [1987] 61 Comp. Cas. 10 (Cal.)
The word ‘misfeasance’ as occurring in section 543(1)(b) of the 1956 Act [corresponding to of the 2013 Act] does not cover every misconduct by a director. There must be a breach of trust. Unless a director has done something wrong by mis-applying or retaining in his own hands any money of the company or the director has done something by which the company properties have been wasted resulting in actual loss to the company, there cannot be any misfeasance.
‘Modification’/ of the 2013 Act S.K. Gupta v. K.P. Jain [1979] 49 Comp. Cas. 342 (SC)
In the context of section 392(1)(b) of the 1956 Act [corresponding to of the 2013 Act], ‘modification’ would mean addition to the scheme of compromise or arrangement or omission therefrom solely for the purpose of making it workable.
‘Money owing’ or ‘money due’ generally defined Indian Co-operative Navigation & Trading Co. Ltd. v. Padamsey Premji [1934] 4 Comp. Cas. 110 (Bom.)
The terms ‘money owing’ or ‘money due’ in their primary sense denote an existing debt, whether or not the right to recover the same is barred under the Limitation Act, though no doubt either expression may bear the secondary meaning of ‘recoverable in law’ if the context so requires.
‘Mortgage, Pledge and Hypothecation’ asgenerally defined Syndicate Bank v. Official Liquidator, Prashant Engg. Co. (P.) Ltd. [1986] 59 Comp. Cas. 301 (Delhi)
Unlike a mortgage, a pledge, or hypothecation does not have the effect of transferring any ‘interest’ in the property in favour of the pledgee or the hypothecatee. The pledge and hypothecation, however, create a special property in the goods in favour of the pledgee or the hypothecatee. In the case of a pledge, the special property is to keep possession of the pledged goods and to dispose them of for the realisation of the debt for which it is held as security. In the case of hypothecation, possession remains with the hypothecator but the hypothecatee has the right to take possession of the hypothecated property and to sell it for the realisation of the debt secured by hypothecation.
‘Necessary’/ of the 2013 Act Great Eastern Electric Co., In re [1942] 12 Comp. Cas. 96 (Ch. D)
The word ‘necessary’ as occurring in section 457(2)(i) of the 1956 Act [corresponding to of the 2013 Act] means that it must not be merely beneficial, but something more, though the necessity must be determined by the Court having regard to all the circumstances of the case.
‘Notices’/ of the 2013 Act Company News & Notes, July 1, 1963 issue
The word ‘notices’ has neither been defined in the Act nor in the General Clauses Act. Accordingly, in the context of section 147(1) of the 1956 Act [corresponding to of the 2013 Act], the word ‘notices’ should be liberally construed so as to include not only notices given under the Act, but also notices inviting tenders, employment notice, notice for loss of shares or debenture certificates, notice for change of name by the company or closure of register of members, etc.
‘Office or place ofprofit’/, Expln., of the 2013 Act CIT v. Principal Officer C/o Arkay Wires (P.) Ltd. [2005] 58 SCL 97 (All.)
The words ‘office or place of profit’ occurring in section 314 of the 1956 Act [corresponding to of the 2013 Act] do include selling and buying agents receiving commission and/or salary.
‘Officer or employee’/ of the 2013 Act Smt. Abhilash Vinod Kumar Jain v. Cox & King’s (India) Ltd. [1995] 4 SCL 167 (SC)/84 Comp. Cas. 28
Term ‘officer or employee’ of a company in section 630(1) of the 1956 Act [corresponding to of the 2013 Act] would by a deeming fiction include legal heirs and representatives of employee or officer concerned continuing in occupation of pro-perty of company after death of employee or officer.
Balder Krishna Sahi v. Shipping Corpn. of India Ltd. [1988] 63 Comp. Cas. 1 (SC)
There is, no warrant to give a restrictive meaning to the term officer or employee appearing in sub-section (1) of section 630 of the 1956 Act. It is quite evident that clauses (a) and (b) are separated by the word ‘or’ and, therefore, are clearly disjunctive.
The term ‘officer or employee’ of a company applies not only to existing officers or employees but also to past officers or employees if such officer or employee either (a) wrongfully obtains possession of any property, or (b) having obtained such property during the course of his employment, withholds the same after the termination of his employment.
Abdul Quayaum Ansari v. State of Maharashtra [1991] 70 Comp. Cas. 368 (Bom.)
On a proper construction of section 630 of the 1956 Act the heirs and legal representatives would be included in the term ‘officer or employee of a company’. An employee who is allotted a residential accommodation by the company does not occupy it alone, but occupies it along with the members of his family.
Pravinbhai Ganeshbhai Chaudhary v. Neutral Glass & Allied Industries (P.) Ltd. [2001] 33 SCL 176 (Guj.)
The term ’employee’ is a wider generic term which would include workmen also. In fact, the definition of workmen in section 529(3)(a) of the 1956 Act [corresponding to of the 2013 Act] itself indicates that the Legislature has treated workmen as one of the categories of employees. The object of section 630 of the 1956 Act is to provide speedy remedy for enabling the company to obtain possession of its property where it is wrongfully obtained or wrongfully withheld by any officer or employee of the company. There will be no rationale in excluding workmen from the scope of section 630 of the 1956 Act.
‘Officer or other employee’/ of the 2013 Act Official Liquidator, Stocking & Sons (P.) Ltd. v. Dr. S.R. Sarma [1970] 40 Comp. Cas. 72 (Mad.)
The words ‘officer or other employee’ in section 468 of the 1956 Act [corresponding to of the 2013 Act] includes ex-officer or ex-employee.
‘Officer who is indefault’/ of the 2013 Act Madan Gopal Dey v. State [1969] 39 Comp. Cas. 119 (Cal.)
Any director of the company who is knowingly guilty of the default or who knowingly or wilfully authorises or permits a default would be an ‘officer who is in default’ as occurring in section 5 of the 1956 Act [corresponding to of the 2013 Act].
‘Other funds’/ of the 2013 Act Straw Products Ltd. v. Registrar of Companies [1969] 39 Comp. Cas. 974 (Ori.)
The expression ‘other funds’ as occurring in section 293(1)(e) of the 1956 Act [corresponding to of the 2013 Act] is wide enough to enable contributions of the kind, specified in the special resolution to be made by the company.
‘Or otherwise’/ of the 2013 Act Kalpana Polytec India Ltd. v. Union of India [2001] 34 SCL 710 (Cal.)
The words ‘or otherwise’ as occurring in section 22(1) of the 1956 Act [corresponding to of the 2013 Act] must be considered in the context of the word ‘inadvertance’. In other words, the word ‘otherwise’ must be read ejusdem generis.
‘Otherwise’/ of the 2013 Act Harinagar Sugar Mills Co. Ltd. v. M.W. Pradhan [1966] 36 Comp. Cas. 426 (SC)
The expression ‘otherwise’ as occurring in section 434(1)(a) of the 1956 Act [corresponding to of the 2013 Act] takes in any person to whom another becomes indebted howsoever the relationship of creditor and debtor is brought about between them.
‘Outside of every office’/ of the 2013 Act Dr. H.L. Batliwalla Sons & Co. Ltd. v. Emperor [1941] 11 Comp. Cas. 154 (Bom.)
Words ‘outside the office’ in section 73(a) of the 1913 Act/147(1)(a) of the 1956 Act [corresponding to of the 2013 Act] do not mean outside the premises or outside the compound wherein the office is situated.
‘Person’/ of the 2013 Act United Western Bank Ltd., In re [2002] 38 SCL 34 (CLB – New Delhi)
Neither the term ‘person’ nor ‘proxy’ has been defined in the Act and, therefore, one has to construe this term ‘person’ with reference to the object with which the same has been used in section 176(1) of the 1956 Act [corresponding to of the 2013 Act]. This section authorizes a member, who is unable to attend a general meeting of a company, to appoint another through an authorization known as a proxy to attend and vote instead of the shareholder himself. Further, the section also says that the proxy shall not have any right to speak. As a rule, a proxy can demand a poll. No company, being an artificial entity can be present, vote and speak or demand a poll. Only a natural person/individual could do all the above. Therefore, the term ‘person’ used in the section means only a natural person/individual and the definition of the General Clauses Act cannot be applied in respect of the term ‘person’ as is used in .
‘Person’/ of the 2013 Act CIT v. Suleman Khan and Mahaboob Khan Tobacco Exporters [2002] 39 SCL 150 (AP)
The assumption that the word ‘person’ occurring in section 11(1) of the 1956 Act [corresponding to of the 2013 Act] takes in a minor also as a partner in a partnership, is based on an erroneous view of the law. The provisions of section 184(3) of the Income-tax Act which provide that the application for registration should be signed by all the persons (not being minors), clearly suggests that under the Income-tax Law, no minor can be a partner in a partnership firm as such.
‘Person aggrieved’/ of the 2013 Act Jagannath Saran v. S.N. Lokras [1951] 21 Comp. Cas. 27 (Nag.)
The expression ‘person aggrieved’ occurring in section 183(5) of the 1913 Act/section 460(6) of the 1956 Act [corresponding to of the 2013 Act] means a person who has suffered a legal grievance, one against whom a decision has been pronounced which has wrongfully deprived him of something or wrongfully refused him something which he has a right to demand or wrongfully affected his title to something.
‘Promoter’/ of the 2013 Act Phosphate Sewage Co. v. Hartmount [1876] 5 Ch. D. 394/Official Receiver & Liquidator of Jubilee Cotton Mills Ltd. v. Lewis [1924] AC 958 (HL)
Promoter is a person who as principal procures or aids in procuring the incorporation of a company.
‘Property’/,Explanation (iv), of the2013 Act Telesound India Ltd., In re [1983] 53 Comp. Cas. 926 (Delhi)
The expression ‘property’ in section 394(4)(a) of the 1956 Act [corresponding to Explanation (iv) to of the 2013 Act] would be wide enough to include rights under a contract including a contract of tenancy.
Nokes v. Doncaster Amalgamated Collieries Ltd. [1941] 11 Comp. Cas. 83 (HL)
The word ‘property’ in section 154 of the English Companies Act, 1929, whether considered alone or in conjunction with the words ‘rights and powers of every description’, means property with which the original company has the right to deal without having to obtain the consent of some third party.
‘Property’/ of the 2013 Act Beguram v. Jaipur Udhyog Ltd. [1987] 61 Comp. Cas. 744 (Raj.)
The word ‘property’ used in section 630(1)(a) of the 1956 Act [corresponding to of the 2013 Act] includes within its purview both movable as well as immovable property and there are no words, express or implied, in this section which can restrict the application of the word ‘property’ to only movable property. The words ‘deliver up’ very well apply to the delivering up of the possession of immovable property. These words are on the other hand, indicative of the fact that immovable properties are also covered in the scope of section 630 of the 1956 Act.
Harkishin Lakhimal Gidwani v. Achyut Kashinath Wagh [1982] 52 Comp. Cas. 1 (Bom.)
The user of both the terms ‘any such property’ and ‘wrongfully obtained’ would strongly indicate that both are independent of each other and not mutually inclusive or overlapping. The term ‘any such property’ in section 630(2) of the 1956 Act [corresponding to of the 2013 Act] governs all the three categories and is not restricted to only one, viz., ‘wrongfully obtained’.
Baldev Krishna Sahi v. Shipping Corpn. of India Ltd. [1988] 63 Comp. Cas. 1 (SC)
There is no warrant for the construction placed by the High Court of Calcutta in Amritlal Churr’s case [1987] 61 Comp. Cas. 211 on the words ‘any such property’ in clause (b) to section 630(1) of the 1956 Act [corresponding to of the 2013 Act] as applicable to ‘such property’ of a company, possession of which is wrongfully obtained by an officer or employee of the company, i.e., refers to the whole of clause (b). According to the plain construction, the words ‘any such property’ in clause (b) relate to any property of a company as mentioned in clause (a).
‘Provide’/ of the 2013 Act Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holding Ltd. [1981] 51 Comp. Cas. 743 (SC)
The word ‘provide’ occurring in section 81(1)(c) of the 1956 Act [corresponding to of the 2013 Act] must be understood to mean ‘provide expressly or by necessary implication’.
‘Provision’ as generally defined Brooke Bond India Ltd. v. D.M. Gandhi [1984] 56 Comp. Cas. 9 (Bom.)
The meaning given to the expression ‘provision’ in the Companies Act is much narrower than that usually is attributed to it in framing accounts. For the purposes of the Companies Act, the word ‘provision’ must not be used, as it is commonly used in practice, to describe amounts set aside to provide for prospective or even potential losses or liabilities; it must only be employed to indicate known depreciation or diminution in the value of assets and known liabilities, the amount of which, however, cannot be estimated with reasonable accuracy.
‘Provisions of this Act’/ of the 2013 Act Cricket Club of India Ltd. v. Madhav L. Apte [1975] 45 Comp. Cas. 574 (Bom.)
It is impossible to read the expression ‘provisions of this Act’ in section 9 of the 1956 Act [corresponding to of the 2013 Act] as indicative merely of the express provisions and exclude the meaning which have to be read in the provisions of the Act by the rule of necessary implication. Any meaning which has to be read in any section of the Act by the rule or principle of necessary implication is as much a provision of the Act as something expressly provided.
‘Public’, as generallydefined Nash v. Lynde [1929] AC 158 (HL)
‘The public’, is of course a general word. No particular numbersare prescribed. Anything from two to infinity may serve: perhaps even one, if he is intended to be the first of a series of subscribers, but makes further proceedings needless by himself subscribing the whole. The point is that the offer is such as to be open to any one who brings his money and applies in due form, whether the prospectus was addressed to him on behalf of the company or not.
‘Public interest’/ & of the 2013 Act N.R. Murty v. Industrial Development Corpn. of Orissa Ltd. [1977] 47 Comp. Cas. 389 (Ori.)
In the case of a company intended to operate in a modern welfare State, the concept of ‘public interest’ takes the company outside the conventional sphere of being a concern in which the shareholders alone are interested. It emphasises the idea of the company functioning for the public good or general welfare of the community, at any rate, not in a manner detrimental to the public good. [See sections 397 and 398 of the 1956 Act]
‘Recognised stock exchange’/ of the 2013 Act Union of India v. Allied International Products Ltd. [1971] 41Comp. Cas. 127 (SC)
The expression ‘a recognised stock exchange’ as occurring in section 73(1) of the 1956 Act [corresponding to of the 2013 Act] means ‘any recognised stock exchange’. Applications can be made to different Stock Exchanges for permission to deal in official quotations of the shares of the company.
‘Reconstruction’ v.’Amalgamation’/ of the 2013 Act Inland Steam Navigation Workers’ Union v. Rivers Steam Navigation Co. Ltd. [1968] 38 Comp. Cas. 99 (Cal.)
There is no particular meaning in the word ‘reconstruction’ or in the word ‘amalgamation’. It has to be found out from the scheme read as a whole whether it is a case of reconstruction or whether it is a case of amalgamation. [See section 394 of the 1956 Act]
‘Rectification’/ of the 2013 Act Cuddalore Construction Co. Ltd., In re [1967] 37 Comp. Cas. 440 (Mad.)
The expression ‘rectification’ as occurring in section 155 of the 1956 Act/Section 111 of the 1956 Act [corresponding to of the 2013 Act] of a company’s register is a purposeful expression. It has a special signification of its own. The word implies that there is a prior error, mistake or defect which is apparent on the face of the record of the register, which, after rectification, is made good and corrected by removing such a mistake or error.
Pulbrook v. Richmond Consolidated Mining Co. [1878] LR 9 Ch. D. 610
The effect of rectification is exactly the same as if the name struck off had never been put in. That is the meaning of ‘rectification’.
‘Relating to windingup of a company’/ of the 2013 Act Bharat Petroleum Corpn. Ltd. v. National Organic Chemical Industries Ltd. [2004] 51 SCL 593/120 Comp. Cas. 333 (Bom.)
The words ‘relating to the winding-up of a company’, used in section 557(1) of the 1956 Act [corresponding to of the 2013 Act] are broad enough to comprehend within their purview, the stage of admission and of final hearing of a company petition for winding-up. Therefore, as a matter of statutory interpretation, the right of the creditors to appear and be heard in all matters relating to the winding-up of a company is recognized by law. The right to appear and be heard comprehends the stage of admission as well.
‘Renew’/ of the 2013 Act Sujani Textiles (P.) Ltd. v. Assistant Registrar of Companies [1980] 50 Comp. Cas. 276 (Mad.)
The word ‘renew’ also means ‘acquire again’. (See section 58A of the 1956 Act)
Jagjivan Hiralal Doshi v. Registrar of Companies [1989] 65 Comp. Cas. 553 (Bom.)
When a company is unable to repay the deposits and, therefore, renews them, what it does is to accept the old deposits for a longer period. The word ‘renew’ means ‘to acquire again’. Hence, renewal of fixed deposits amounts to receiving fresh deposits within the meaning of section 58A of the 1956 Act.
‘Revenues’/ of the 2013 Act STO v. Official Liquidator [1968] 38 Comp. Cas. 430 (All.)
The word ‘revenues’ used in section 530(1)(a) of the 1956 Act[corresponding to of the 2013 Act] means reve-nues which have become due and payable and revenues within the twelve months next before the date of winding up, and not revenues which are recoverable as arrears of land revenue.
Petlad Nagarpalika v. Rajratna Naranbhai Mills Co. Ltd. [1974] 44 Comp. Cas. 517 (Guj.)
Expression ‘revenues’ must be understood in the sense of compulsory exaction or in contradistinction to the income coming in the coffers of the Central or State Government or local authority from its commercial or industrial activities.
‘Sale held’/ of the 2013 Act B. Suresh v. A.P. Mahesh Co-op. Urban Bank Ltd. [2001] 34 SCL 939/[2002] 108 Comp. Cas. 283 (AP)
The expression ‘sale held’ occurring in section 537(1)(b) of the 1956 Act [corresponding to of the 2013 Act] takes within its sweep whether it is voluntary sale by the company or a sale brought by a third party for whatever reason, to be void if made without the leave of the Company Court during the pendency of the winding up proceedings.
‘Services’/ of the 2013 Act Suessen Textile Bearings Ltd. v. Union of India [1984] 55 Comp. Cas. 492 (Delhi)
The meaning of the word ‘service’ would have to be limited to manual, clerical, technical and supervisory/administrative service only. In any case, any act done by a director, though helpful to the company but involving his financial liability would not amount to service rendered within the meaning of section 309 of the 1956 Act [corresponding to of the 2013 Act].
‘Services rendered to the company’/ of the 2013 Act Rajeev Shenoy K.R., Trustee of Premier Cable Provident Fund v. Official Liquidator [2009] 152 Comp. Cas. 592 (Ker.)
The employment of the words ‘services rendered to the company’ in section 529(3)(b)(i) of the 1956 Act [corresponding to of the 2013 Act] is only to enlarge the scope of that provision to ensure that nothing escapes from that which is the entitlement of a workman. It can never be understood as a restriction to be read as one legislatively imposed, whereby every claim of wages, salary, etc., would have to be tested on a touchstone as to whether any service has been actually and physically rendered to the company by the workman in question. Any workman in employment could be legitimately forced to the situation of cessation from employment, only by the recognized methods.
‘Shall’/ of the 2013 Act Smt. Bhagwati Devi Bubna v. Dhanraj Mills (P.) Ltd. [1969] 39 Comp. Cas. 1023 (Pat.)
The word ‘shall’ as occurring in section 446(1) of the 1956 Act [corresponding to of the 2013 Act] may be read as ‘may’.
‘Shall be deemed to have agreed to become members of company’/ of the 2013 Act U.P. Oil Mills Co. Ltd. v. Jamna Prasad [1933] 3 Comp. Cas. 256 (All.)
Words ‘shall be deemed to have agreed to become members of the company’ as occurring in section 30 of the 1913 Act/section 41 of the 1956 Act [corresponding to of the 2013 Act] mean that the subscribers of the memorandum of a company are to be treated as having become members of the company by the fact of the subscription; by merely subscribing to the memorandum of association a person becomes member of the company.
‘Share’, as generally defined S.N.D.P. Yogam Quilon, In re [1970] 40 Comp. Cas. 60 (Ker.)
‘Share’, as defined in the Companies Act and as understood in company law, means share in the capital of a company. It is a tangible property.
Borland’s Trustees v. Steel Bros. & Co. [1901] 1 Ch.D 279/S.N.D.P. Yogam Quilon, In re [1970] 40 Comp. Cas. 60 (Ker.)
A share is not a sum of money but is the interest of a shareholder in the company measured by a sum of money for the purpose of the liability in the first place, and of interest in the second, but also consisting of a series of mutual covenants entered by all the shareholders inter se. It is an interest measured by a sum of money and made up of various rights contained in the contract, including the right to a sum of money of a more or less amount.
‘Share’ and ‘capital’, as generally defined S.N.D.P. Yogam Quilon, In re [1970] 40 Comp. Cas. 60 (Ker.)
The words ‘capital’ and ‘share capital’ are synonymous. It may mean the nominal or the authorised capital, the issued capital or the paid-up capital; and the meaning depends in the context in which that term is used. It also follows from that a company having share capital is a company registered with a nominal or authorised capital, which is divided into shares of a fixed amount.
‘Solvent’/ of the 2013 Act Patrick & Lyon Ltd., In re [1933] 3 Comp. Cas. 449 (Ch. D)
A company is not solvent within the meaning of this section, unless it can pay its debts as they become due. The contention that ‘solvent’ as occurring in section 534 of the 1956 Act [corres-ponding to of the 2013 Act] means ‘commercially solvent’, and that if, upon balance sheet figures, a company’s assets exceed its liabilities the company is solvent, is not correct.
‘Subject to provisions of this Act’/ of the 2013 Act S. Pazhamalai v. Aruna Sugars Ltd. [1984] 55 Comp. Cas. 500 (Mad.)
The expression ‘subject to the provisions of this Act’ occurring in section 257(1) of the 1956 Act [corresponding to of the 2013 Act] will only qualify the person who is not a retiring director.
‘Substantial powers of management’/ of the 2013 Act Wasava Tyres v. Printers (Mysore) Ltd. [2007] 139 Comp. Cas. 446 (Kar.)
The words ‘substantial powers of management’ as occurring in section 2(26) of the 1956 Act [corresponding to of the 2013 Act] specifically excludes certain acts from its purview. Therefore, except the excluded acts the managing director has power and privilege of conducting the business of the company in accordance with the memorandum and articles of association of the company. The institution of the suit on behalf of the company by the Managing Director is deemed to be within the meaning of ‘substantial powers of management’ since such a power is necessary and incidental for managing the day-to-day affairs and business of the company.
‘Such other matters asmay be prescribed’/ of the 2013 Act Gulzari Lal Bhargava v. Official Receiver-cum-Official Liquidator, Ammonia Supplies Corpn. (P.) Ltd. [1972] 42 Comp. Cas. 401 (Delhi)
The words ‘such other matters as may be prescribed’ as occurring in section 461(1) of the 1956 Act [corresponding to of the 2013 Act] cannot be said to relate to the account books since it has to be read as ejusdem generis.
‘Sufficient’/ of the 2013 Act Benarsi Das Saraf v. Dalmia Dadri Cement Ltd. [1958] 28 Comp. Cas. 435 (Punj.)
The word ‘sufficient’ as occurring in section 155/111 of the 1956 Act [corresponding to of the 2013 Act] means ‘adequate’ ‘enough’, ‘as much as may be necessary to answer the purpose intended’.
‘Sufficient cause’/ of the 2013 Act Karamsad Investments Ltd. v. Nile Limited [2001] 34 SCL 269/[2002] 108 Comp. Cas. 58 (AP)
Expression ‘sufficient cause’ occurring in proviso to sub-section (2) of section 111A of the 1956 Act [corresponding to of the 2013 Act] takes within its sweep not only those contingencies contemplated under sub-section (3) of section 111A but the company to refuse, also circumstances and reasons other than those contemplated under sub-section (3) which might require to register transfer of shares and such a refusal would be refusal for ‘sufficient cause’.
‘Suit has beeninstituted’/ of the 2013 Act Osier Electric Lamp Mfg. Co. Ltd., In re [1967] 37 Comp. Cas. 306 (Cal.)
The words ‘suit has been instituted’, ‘claim or question has arisen’, in sub-section (2) of section 446 of the 1956 Act [corresponding to of the 2013 Act] refer to suit or application or claim or question pending in a Court other than the winding up Court.
Osier Electric Lamp Mfg. Co. Ltd., In re [1967] 37 Comp. Cas. 306 (Cal.)
The words ‘is instituted’, ‘arises’ or ‘is made’ in sub-section (2) of section 446 of the 1956 Act suggest that such a suit or claim or application was made after the date of winding up of the company.
‘Suit or other legal proceeding’// of the 2013 Act Life Insurance Corpn. of India v. Asia Udyog (P.) Ltd. [1984] 55 Comp. Cas. 187 (Delhi)(FB)
The meaning of the word ‘legal proceeding’ under section 446 of the 1956 Act [corresponding to of the 2013 Act] will naturally take colour from the object which is sought to be served by section 446.
Manekchowk & Ahmedabad Mfg. Co. Ltd., In re [1983] 53 Comp. Cas. 515 (Guj.)
The term ‘legal proceedings’ is of the widest amplitude. In S.V. Kondaspal, Official Liquidator & Liquidator of Colaba Land & Mills Co. Ltd. (in liquidation) v. V.M. Deshpande, ITO [1972] 42 Comp. Cas. 168, the Supreme Court considered the exact import of the expression ‘other legal proceeding’ in sub-sections (1) and (2) of section 446 of the 1956 Act [corresponding to & of the 2013 Act]. The said expression takes within its sweep those proceedings only which can appropriately be dealt with by the winding up Court.
Tika Ram & Sons (P.) Ltd. v. CIT [1964] 34 Comp. Cas. 151 (All.)
The words ‘other legal proceedings’ must be such proceedings over which the High Court in its ordinary jurisdiction can exercise some original or appellate jurisdiction and control.
Harbans Lal Sharma v. Chemical Vessels Fabricators (P.) Ltd. [1989] 65 Comp. Cas. 506 (Punj. & Har.)
The words ‘no suit or legal proceedings. . . against the company’ in section 446(1) of the 1956 Act [corresponding to of the 2013 Act] will mean proceedings in which the assets or the effects of the company are involved.
Televista Electronics (P.) Ltd. v. Mass Communications & Marketing (P.) Ltd. [1980] 50 Comp. Cas. 1 (Delhi)
The words ‘suit or proceeding’ used in section 446(1) of the 1956 Act [corresponding to of the 2013 Act] are general and include an interpleader suit.
Ion Exchange Finance Ltd. v. Firth India Steel Co. Ltd. (In Liquidation) [2001] 30 SCL 437/103 Comp. Cas. 666 (Bom.)
The expression ‘legal proceeding’ or ‘other legal proceeding’ for the purpose of section 442 and section 446 of the 1956 Act must be read ejusdem generis with the expression ‘suit’ and can mean only civil proceedings, and not criminal proceedings. The expression ‘suit or other legal proceeding’ in section 446(1) of the 1956 Act [corresponding to of the 2013 Act] does not include criminal complaints filed under section 138 of the Negotiable Instruments Act, 1881.
V. Susgandha Lal v. Boby Varghese, Director, St. Mary’s Finance Ltd. [2000] 27 SCL 51/107 Comp. Cas. 451 (Ker.)
The term ‘proceeding’ can only mean proceeding similar to a suit and in the light of the provisions in the Act and the Code of Criminal Procedure, 1973, the term ‘proceeding’ mentioned in section 446(2) of the 1956 Act [corresponding to of the 2013 Act] cannot mean criminal proceedings.
Pennar Paterson Ltd., In re [2002] 36 SCL 525 (AP)
Expression ‘other legal proceedings’ occurring to section 446(1) of the 1956 Act [corresponding to of the 2013 Act] does not embrace within its fold a criminal prosecution.
D.K. Kapur v. Reserve Bank of India [2001] 30 SCL 96/105 Comp. Cas. 643 (Delhi)
The expression ‘other legal proceedings’ must be read in ejusdem generis with the expression ‘suit’ in section 446 of the 1956 Act. If so read, it can only refer to any civil proceedings and criminal proceedings have to be excluded.
Harish C. Raskapoor v. Jaferbhai Mohmedbhai Chhatpar/Divya Vasundhara Financiers (P.) Ltd., In re [1989] 65 Comp. Cas. 163 (Guj.)
The term ‘suit or other proceeding’ as employed in various other sub-sections of section 446 of the 1956 Act would cover all types of proceedings against the company including even criminal proceedings.
Rakoor Industries (P.) Ltd. v. R.L. Bali, ITO [2002] 36 SCL 747/39 SCL 139/108 Comp. Cas. 83 (Delhi)
Expression ‘legal proceedings’ in section 446(1) of the 1956 Act [corresponding to of the 2013 Act] is wide enough to include criminal prosecution also but such proceedings must be in relation to the assets of the company.
Jose Antony Kakkad v. Official Liquidator, High Court of Kerala [2000] 27 SCL 251/100 Comp. Cas. 811 (Ker.)
The words ‘legal proceedings’ in section 446 of the 1956 Act are wide enough to take in criminal proceedings and such criminal proceedings must be in relation to the assets of the company.
Anil Hada v. Indian Acrylics Ltd. [2000] 99 Comp. Cas. 10 (Punj. & Har.)
The words ‘legal proceedings’ appearing in section 446 of the 1956 Act should be interpreted in the manner that criminal proceedings must be in relation to the assets of the company but proceedings under section 138 of the Negotiable Instruments Act are not in relation to the assets of the company.
Official Liquidator v. Andhra Pradesh State Financial Corpn. [2001] 33 SCL 271/105 Comp. Cas. 778 (AP)
Normally, the expression ‘other legal proceedings’ is wide enough to include the execution proceedings. But, in view of the specific provision under section 537 of the 1956 Act [corresponding to of the 2013 Act], such a construction must be ruled out for the reason that the specific always excludes the general and section 537 of the 1956 Act contains a specific prescription with regard to the execution proceedings.
Official Liquidators, the Calicut Bank v. Nekkat [1944] 14 Comp. Cas. 7 (Mad.)
The word ‘proceeding’ in section 171 of the 1913 Act/section 446 of the 1956 Act [corresponding to of the 2013 Act] includes execution under a judgment in an action.
‘The affairs of com-pany’/ of the 2013 Act Jiyajeerao Cotton Mills Ltd. v. Company Law Board [1969] 39 Comp. Cas. 856 (MP)
The expression ‘the affairs of the company’ as occurring in section 237(a) of the 1956 Act [corresponding to of the 2013 Act] is wide enough to include contravention of any law for the time being in force.
‘The affairs of the company’/ of the 2013 Act Shankar Sundaram v. Amalgamations Ltd. [2002] 38 SCL 777 (Mad.)
In certain circumstances the affairs of holding company would include the affairs of the subsidiary company and, therefore, it cannot be stated that the expression ‘affairs of the company’ in sections 397 and 398 of the 1956 Act [corresponding to of the 2013 Act] does not include the affairs of subsidiary company. In each case it has to be investigated and decided whether the expression, ‘affairs of the company’ would include the affairs of the subsidiary company as well.
Chander Krishan Gupta v. Pannalal Girdhari Lal (P.) Ltd. [1984] 55 Comp. Cas. 702 (Delhi)
The expression ‘the affairs of the company are being conducted in a manner prejudicial to the interest of the company’ in sections 397 and 398 of the 1956 Act [corresponding to of the 2013 Act] will take within its ambit the non-conduct of the affairs of the company and which non-conduct results in prejudice being caused to the company.
Central Government v. Kopran Ltd. [2004] 56 SCL 428 (CLB-New Delhi)
The words used in section 397/398 of the 1956 Act are ‘the affairs of the company are being conducted. . .’ The expression is in the present tense and not in future or past. The Company Law Board cannot interfere on the ‘basis that a company in future would be acting in a manner prejudicial to public interest’.
‘The fact of anyperson having becomea member’/ of the 2013 Act Kamalabai (Smt.) v. Vithal Prasad Co. (P.) Ltd. [1993] 77 Comp. Cas. 231 (Kar.)
In clause (b) of section 155(1)/111(4) of the 1956 Act [corresponding to of the 2013 Act] the words ‘the fact of any person having become a member’ have been construed to mean ‘having become entitled to be a member’ or having got the right of membership. The power of the Company Court under section 155 of the 1956 Act is very wide. It makes it clear that not only any member of the company, but also a ‘person aggrieved’ may apply to the Court for rectification of the register of members.
Nazamunnessa Begum v. Vidya Sagar Cotton Mills Ltd. [1963] 33 Comp. Cas. 36 (Cal.)
The expression ‘any person having become a member’ in section 155(1)(b) of the 1956 Act means a person ‘having become entitled to be a member’ or ‘having got the right of membership’. Alternatively, the word ‘become’ means ‘come to be’.
‘Then due’/ of the 2013 Act Lakshmi Sugar Mills Co. (P.) Ltd. v. National Industrial Corpn. Ltd. [1968] 38 Comp. Cas. 384 (Punj.)
The expression ‘then due’ as occurring in section 434(1)(a) of the 1956 Act [corresponding to of the 2013 Act] in that provision has reference in point of time to the time of service of the notice referred to therein.
‘To institute a suit’ occurring in of the 2013 Act Eastern Coal Co. Ltd. v. Sunil Kumar Roy [1969] 39 Comp. Cas. 126 (Cal.)
As a matter of words, ‘to institute a suit’ as occurring in section 457(1)(a) of the 1956 Act [corresponding to of the 2013 Act] can never mean ‘to continue a suit’. To institute a suit is to lay the foundation of the suit, to commence the suit. Once the foundation is so laid the suit gets going. The plaintiff, who has instituted the suit and has the carriage of the suit, goes on with the suit that is to say, continues the suit. It, therefore, appears to be plain that ‘to institute a suit’ and ‘to continue the suit’ cannot be regarded as synonymous expressions.
‘Transfer’/ of the 2013 Act Lyle & Scott Ltd. v. Scott’s Trustees [1960] 30 Comp. Cas. 30 (HL)
Transferring a share involves a series of steps, first an agreement to sell, then the execution of a deed of transfer and finally the registration of the transfer. The word ‘transfer’ can mean the whole of those steps. Moreover, the ordinary meaning of ‘transfer’ is simply to hand over or part with something, and a shareholder who agrees to sell is parting with something. The context must determine in what sense the word is used.
‘Transfer’ and ‘Trans-mission’/ of the 2013 Act Hemendra Prasad Barooah v. Bahadur Tea Co. (P.) Ltd. [1991] 70 Comp. Cas. 792 (Gauhati)
The expressions ‘transfer’ and ‘transmission’ have been employed in section 108 of the 1956 Act [corresponding to of the 2013 Act]. The word ‘transfer’ is an act of the parties or of the law, by which title to property is conveyed from one person to another. Inter vivos transfer is a transfer from one living person to another. It is a transfer of property during the lifetime of the owner and it is to be distinguished from testamentary transfer of succession where the property passes on death. Under section 211 of the Indian Succession Act, the executor of a deceased person is the legal representative for all purposes, and all the property of the deceased person vests in him as such. On a reading of sections 108,109, 110 and 111 of the 1956 Act together the word ‘transmission’ has been used in section 111 of the 1956 Act in contradistinction to the word ‘transfer’. ‘Transmission’ is referable to devolution of title by operation of law. It may be by succession or by testamentary transfer. As regards ‘transfer’, it has been used to mean inter vivos transfer.
‘Unable to pay its dues’and ‘is unable to pay its debts’/ of the 2013 Act Reliance Infocomm Ltd. v. Sheetal Refineries (P.) Ltd. [2008] 142 Comp. Cas. 170 (AP)
The words ‘unable to pay its dues’ in section 433(e) of the 1956 Act [corresponding to of the 2013 Act] should be taken in the commercial sense, in that, it is unable to meet its current demands, i.e., it is plainly and commercially insolvent – that is to say, its assets are such and its existing liabilities are such as to make it reasonably certain – as to make the court feel satisfied – that the existing and provable assets would be insufficient to meet the existing liabilities. The language of the section ‘is unable to pay its debts’ means that the company is commercially insolvent. In other words, the company has no wherewithal to meet its commercial liabilities. The machinery for winding up will not be allowed to be utilised merely as a means for realising the debts due from a company.
‘Undertaking’/ of the 2013 Act Yallamma Cotton, Woollen & Silk Mills Co. Ltd., In re [1970] 40 Comp. Cas. 466 (Mys.)
The word ‘undertaking’ as occurring in section 293(1)(a) of the 1956 Act [corresponding to of the 2013 Act] is not in its real meaning anything which may be described as a tangible piece of property like land, machinery or the equipment; it is in actual effect an activity of man which in commercial or business parlance means an activity engaged in with a view to earn profit. Property, movable or immovable, used in the course of or for the purpose of such business can more accurately be described as the tools of business or undertaking, i.e., things or articles which are necessarily to be used to keep the undertaking going or to assist the carrying on of the activities leading to the earning of profits.
International Cotton Corpn. (P.) Ltd. v. Bank of Maharashtra [1970] 40 Comp. Cas. 1154 (Mys.)
The word ‘undertaking’ has been defined as ‘any business or any work or project which one engages in or attempts as an enterprise analogous to business or trade’. The business or undertaking of the company must be distinguished from the properties belonging to the company.
‘Unless the Court other-wise order’/ of the 2013 Act Prudential Capital Markets Ltd. (In Liquidation), In re [2007] 140 Comp. Cas. 754/[2008] 84 SCL 239 (Cal.)
The expression ‘unless the Court otherwise orders’ as occurring in section 536(2) of the 1956 Act [corresponding to of the 2013 Act] applies both before and after the disposition of any property or effects of the company covered by the period. The test is the same. If the Court were to consider ex post facto, the prudence and necessity of a disposition, it has to place itself in the position that it would have been in, if prior leave was sought for the transaction.
Bank of Tokyo – Mitsubishi Ltd. v. Essar Steel Ltd. [2000] 27 SCL 411 (Guj.)
The expression ‘unless the Court otherwise orders’ as occurring in sub-section (2) of section 536 of the 1956 Act casts a duty on the judge to examine as to whether the dealing in question was being entered into in good faith and with honest intention.
‘Valid’/ of the 2013 Act Cricket Club of India Ltd. v. Madhav L. Apte [1975] 45 Comp. Cas. 574 (Bom.)
The word or the adjective ‘valid’ in section 169(6) of the 1956 Act [corresponding to of the 2013 Act] has no reference to the object of the requisition but rather to the requirements in that section itself. If these requirements indicated in the earlier part of the section are satisfied, then the requisition deposited with the company must be regarded as a valid requisition on which the directors of a company must act.
‘Void and voidable’ as generally defined East India Co. v. Official Liquidator [1970] 40 Comp. Cas. 297 (Guj.)
There are two points of distinction between void and voidable acts. Firstly, an act which is void is of no force and effect; ab initio it never had any binding force. On the other hand, an act which is voidable is valid and remains valid until the Court takes some action to avoid it; it is voidable at the discretion of the Court so that the Court is not bound to quash it. Secondly, the distinction between void and voidable acts depends on the method by which it is challenged. A voidable act can be invalidated only in certain kinds of proceedings: these proceedings are specially formulated for the purpose of directly challenging such acts. Appellate proceedings constitute the classic instance of such a method of review. In such proceedings the disputed decision may be set aside or modified without affecting its essential validity prior to the appeal. Following American nomenclature, these proceedings may be termed ‘direct proceedings’. On the other hand, when an act is not merely voidable but void, it is a nullity and can be disregarded and impeached in any proceedings, before any Court or Tribunal and whenever it is relied upon. In other words, it is subject to ‘collateral attack’.
‘Voting in person’/ present and voting of the 2013 Act Hind Lever Chemicals Ltd., In re [2005] 58 SCL 211 (Punj. & Har.)
Section 391(2) of the 1956 Act [corresponding to of the 2013 Act] has been enacted so as to ensure that a compromise or arrangement should receive substantial support from the creditors/shareholders. For that purpose a two-fold requirement has been prescribed. Firstly, it must be approved by a majority in number of the members present and voting and in addition, such majority should also represent three-fourths value of the creditors/shareholders who are present and voting. That ensures that the persons representing nominal value of shares or credits, though may be in majority, yet may not take a decision which adversely affects the rights of the persons who have substantial shareholding or credit, but are in minority in numbers. Conver-sely, it also protects the rights of the small creditors/shareholders against persons holding large shareholdings or representing substantial credit. The words and phrases employed in that provision clearly show that the requirement of three-fourths majority relates to the value of shares/credit represented by the shareholders or members who are present and voting and not of the total value of shares/credits of the company. That is the only interpretation that can be ascribed to the words ‘present and voting’ in section 391(2) of the 1956 Act.
Swift Formulations (P.) Ltd., In re [2004] 53 SCL 433 (Punj. & Har.) (FB)
For the purposes of section 391(2) of the 1956 Act, the requirement of majority of three-fourth has to be seen in relation to the value of shares/credit represented by the persons who are ‘present and voting’ in the meeting, either in person or by proxy. This provision cannot be interpreted to mean that the three-fourth majority has to be of the total value of the creditors/shareholders of the company. It has been correctly pointed out that taking later view would render the words ‘present and voting’ redundant, which would be contrary to the well settled rules of construction. If the intention was to have three-fourth majority of the total value, the provisions would have been worded accordingly. The language of section 391(2) of the 1956 Act is totally unambiguous and a plain reading of this provision clearly shows that the majority in number by which a compromise or arrangement is approved should represent three-fourth in value of the creditors/shareholders who are ‘present and voting’ and not of the ‘total’ value of the shareholders or creditors of the company.
Bassemer Steel & Ordnance Co., In re [1875-76] 1 Ch.D 251
‘Three-fourths in value of the creditors’ as occurring in section 391(2) of the 1956 Act [corresponding to of the 2013 Act] means three-fourths of the value of debts of those present at voting, and not the value of entire debt.
‘With intent to defraud creditors’ as generallydefined William C. Leitch Bros. Ltd., In re [1933] 3 Comp. Cas. 97 (Ch.D)
The meaning of the phrase carrying on business ‘with intent to defraud creditors’ is that, if a company continues to carry on business and to incur debts at a time when there is to the knowledge of the directors no reasonable prospect of the creditors even receiving payment of those debts, it is, in general, a proper inference that the company is carrying on business with intent to defraud.
‘Withholding’/ of the 2013 Act Lalita Jalan v. Bombay Gas Co. Ltd. [2003] 44 SCL 130/114 Comp. Cas. 515 (SC)
The main ingredient of section 630(1)(b) of the 1956 Act [corres-ponding to of the 2013 Act] is wrongful withholding of the property of the company or knowingly applying it for purposes other than those expressed or directed in the articles and authorised by the Act. The dictionary meaning of the word ‘withholding’ is to hold back; to keep back; to restrain or decline to grant. The holding back or keeping back is not an isolated act but is a continuous process by which the property is not returned or restored to the company which is deprived of its possession. If the officer or employee of the company does any such act by which the property given to him is wrongfully withheld and is not restored back to the company, it will clearly amount to an offence within the meaning of section 630 of the 1956 Act. The object of enacting the section is that the property of the company is preserved and is not used for purposes other than those expressed or directed in the Articles of Association of the company or as authorised by the provisions of the Act.
‘Wrongfully’/ of the 2013 Act B.R. Herman & Mohatta India Ltd. v. Ashok Rai [1984] 55 Comp. Cas. 61 (Delhi)
The expression ‘wrongfully’ used in clause (a) of section 630(1) of the 1956 Act [corresponding to of the 2013 Act] would mean that a person continues to remain in possession or hold the property otherwise than in due course of law.
Income Tax 2019 | Tina Saha |