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The Companies Act, 1956

Title : The Companies Act, 1956

Year : 1956



[Repealed by the Companies (Amendment) Act, 2000 (53 of 2000), section 170 (w.e.f. 13-12-2000).]



[Repealed by the Companies (Amendment) Act, 2000 (53 of 2000), section 170 (w.e.f. 13-12-2000).]



[Repealed by the Companies (Amendment) Act, 2000 (53 of 2000), section 170 (w.e.f. 13-12-2000).]

383A - 1* Certain companies to have secretaries

(1) Every company 2*[having such paid-up share capital as may be prescribed3*] shall have a whole-time secretary and where the Board of directors of any such company comprises only two directors, neither of them shall be the secretary of the company.

4*[Provided that every company not required to employ a whole-time secretary under sub-section (1) and having a paid-up share capital of ten lakh rupees or more shall file with the Registrar a certificate from a secretary in whole-time practice in such form and within such time and subject to such conditions as may be prescribed, as to whether the company has complied with all provisions of this Act and a copy of such certificate shall be attached with Board's report referred to in section 217.]

5*[(1A) If a company fail to comply with the provisions of sub-section (1), the company and every officer of the company who is in default, shall be punishable with fine which may extend to 6 [five hundred rupees] for every day during which the default continues:-

Provided
that in any proceedings against a person in respect of an offence under this sub-section, it shall be a defence to prove that all reasonable efforts to comply with the provisions of sub-section (1) were taken or that the financial position of the company was such that it was beyond its capacity to engage a whole-time secretary.]

(2) Where, at the commencement of the Companies (Amendment) Act, 1974, -

(a) Any firm, or body corporate is holding office, as the secretary of a company, such firm or body corporate shall, within six months from such commencement, vacate office as secretary of such company;

(b) Any individual is holding office as the secretary of more than one company having a paid-up share capital of rupees twenty-five lakhs or more, he shall, within a period of six months from such commencement, exercise his option as to the company of which he intends to continue as the secretary and shall, on and from such date, vacate office as secretary in relation to all other companies.]

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1. Inserted by Act 41 of 1974, Section 30 (w.e.f. 1-2-1975).

2. Substituted by Act 31 of 1988, Section 53, for "having a paid-up share capital of rupees twenty five lakhs or more" (w.e.f. 1-12- 1988).

3. Every company having paid-up share capital of Rs. 2 crore and above shall have a whole time Secretary [Companies (Appointment and Qualifications of Secretary) Rules, 1988.]

4. Inserted by Act 53 of 2000, Section 171 (w.e.f. 13-12-2000).

5. Inserted by Act 31 of 1988, Section 53 (w.e.f. 1-12-1988).

6. Substituted by Act 53 of 2000, Section 171, for "fifty rupees" (w.e.f. 13-12-2000).

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1*[No company] shall, after the commencement of this Act, appoint or employ, or after the expiry of six months from such commencement continue the appointment or employment of, any firm, body corporate or association as its manager.

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1. Substituted by Act 65 of 1960, section 145, for certain words (w.e.f. 28-12-1960).

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(1) No company shall, after the commencement of this Act, appoint or employ, or continue the appointment or employment of, any person as its manager who-

(a) Is an undischarged insolvent, or has at any time within the preceding five years been adjudged an insolvent; or

(b) Suspends, or has at any time within the preceding five years suspended, payment to his creditors; or makes, or has at any time within the preceding five years made, a composition with them; or

(c) Is, or has at any time within the preceding five years been, convicted by a Court in India of an offence involving moral turpitude.

(2) The Central Government may, by notification in the Official Gazette remove the disqualification incurred by any person in virtue of clause (a), (b) OF (c) of sub-section (1), either generally or in relation to any company or companies specified in the notification.



(1) No company shall, after the commencement of this Act, appoint or employ any person as manager, if he is either the manager or the managing director of any other company, except as provided in sub-section (2).

(2) A company may appoint or employ a person as its manager, if he is the manager or managing director of one, and not more than one, other company:-

Provided that such appointment or employment is made or approved by a resolution passed at a meeting of theBoard with the consent of all the directors present at the meeting, and of which meeting and of the resolution to be moved thereat, specific notice has been given to all the directors then in India.

(3) Where at the commencement of this Act, any person is holding the office either of manager or of managing director in more than two companies, he shall, within one year from the commencement of this Act, chose not more than two of those companies as companies in which he wishes to continue to hold the office of manager or managing director, as the case may be; and the provisions of clauses (b) and (c) of sub-section (1) and of sub-sections (2) and (3) of section 276 shall apply mutatis mutandis in relation to this case, as those provisions apply in relation to the case of a director.

(4) Notwithstanding anything contained in sub-sections (1) to (3), the Central Government may, by order, permit any person to be appointed as a manager of more than two companies, if the Central Government is satisfied that it is necessary that the companies should, for their proper working, function as a single unit and have a common manager.

1 [***]

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1. Sub-section (5) omitted by Act 65 of 1960, Section 146 (w.e.f. 28-12-1960).

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The manager of a company may, subject to the provisions of section 198, receive remuneration either by way of a monthly payment, or by way of a specific percentage, 1 [***] of the "net profits" of the company calculated in the manner laid down in sections 349 2*[and 350], or partly by the one way and partly by the other:-

3*[Provided that except with the approval of the Central Government such remuneration shall not exceed in the aggregate five per cent of the net profits.]

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1. The words "not exceeding five" omitted by Act 65 of 1960, Section 147 (w.e.f. 28-12-1960).

2. Substituted by Act 53 of 2000, Section 172, for ", 350 and 351" (w.e.f. 13-12-2000).

3. Inserted by Act 65 of 1960, Section 147 (w.e.f. 28-12-1960).

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The provisions of sections1*[269,310], 311 and 317 shall apply in relation to the manager of a company as they apply in relation to a managing director thereof, and those of section 312 shall apply in relation to the manager of a company, as they apply to a director thereof.

388A -2* Sections 386 to 388 not to apply to certain private companies

Sections 386, 387 and 388 shall not apply to a private company unless it is a subsidiary of a public company.]

388B - Reference to Tribunal of cases against managerial personnel

(1) Where in the opinion of the Central Government there are circumstances suggesting-

(a) That any person concerned in the conduct and management of the affairs of a company is or has been in connection therewith guilty of fraud, misfeasance, persistent negligence or default in carrying out his obligations and functions under the law, or breach of trust; or

(b) That the business of a company is not or has not been conducted and managed by such person in accordance with sound business principles or prudent commercial practices; or

(c) That a company is or has been conducted and managed by such person in a manner which is likely to cause, or has caused, serious injury or damage to the interest of the trade industry or business to which such company pertains; or

(d) That the business of a company is or has been conducted and managed by such person with intent to defraud its creditors, members or any other persons or otherwise for a fraudulent or unlawful purpose or in a manner prejudicial to public interest,
the Central Government may state a case against the person aforesaid and refer the same to the 3* [4*[5*[Tribunal] with a request that the 3*[4*[5* [Tribunal] may inquire into the case and 6*[record a decision] as to whether or not such person is a fit and proper person to hold the office of director or any other office connected with the conduct and management of any company.

(2) Every case under sub-section (1) shall be stated in the form of an application which shall be presented to the3*[4*[5*[Tribunal] or such officer thereof as it may appoint in this behalf.

(3) The person against whom a case is referred to the 3*[4*[5*[Tribunal] under this section shall be joined as a respondent to the application.

(4) Every such application-

(a) Shall contain a concise statement of such circumstances and materials as the Central Government may consider necessary for the purpose of the inquiry, and

(b) Shall be signed and verified in the manner laid down in the Code of Civil Procedure, 1908 (5 of 1908), for the signature and verification of a plaint in a suit by the Central Government.

(5) The 3*[4*[5*[Tribunal] may at any stage of the proceedings allow the Central Government to alter or amend the application in such manner and no such terms as may be just, and all such alterations or amendments shall be made as may be necessary for the purpose of determining the real questions in the inquiry.

388C - Interim order by Tribunal

(1) Where during the pendency of a case before the 3*[4*[5* [Tribunal] it appears necessary to the 3*[4*[5*[Tribunal] so to do in the interest of the members or creditors of the company or in the public interest, the 3*[4*[5*[Tribunal] may on the application of the Central Government or on its own motion, by an order-

(a) Direct that the respondent shall not discharge any of the duties of his office until further orders of the 3*[4*[5*[Tribunal], and

(b) Appoint a suitable person in pace of the respondent to discharge the duties of the office held by the respondent subject to such terms and conditions as the 3*[4*[5*[Tribunal] may specify in the order.

(2) Every person appointed under clause (b) of sub-section (1) shall be deemed to be a public servant within the meaning of section 21 of the Indian Penal Code (45 of 1860).

388D - Decision of the Tribunal

At the conclusion of the hearing of the case, the 3*[4*[5*[Tribunal] shall record its 7*[decision] stating therein specifically as to whether or not the respondent is a fit and proper person to hold the office of director or any other office connected with the conduct and management of any company.

388E - Power of Central Government to remove managerial personnel on the basis of Tribunal decision

(1) Notwithstanding any other provision contained in this Act, the 8* [Central Government shall], by order, remove from office any director, or any other person concerned in the conduct and management of the affairs, of a company against whom where is a 9*[decision of the 3*[4*[5*[Tribunal] under this Chapter]:

10 [***]

11 [***]

(3) The person against whom an order of removal from office is made under this section shall not hold the office of a director or any other office connected with the conduct and management of the affairs of any company during a period of five years from the date of the order of removal:-

Provided that the Central Government may, with the previous concurrence of the 3*[4* [5* [Tribunal] permit such person to hold any such office before the expiry of the said period of five years.

(4) Notwithstanding anything contained in any other provision of this Act, or any other law or any contract, memorandum or articles, on the removal of a person from the office of a director or, as the case may be, any other office connected with the conduct and management of the affairs of the company, that person shall not be entitled to, or be paid, any compensation for the loss or termination of office.

(5) On the removal of a person from the office of a director or, as the case may, be, any other office connected with the conduct and management of the affairs of the company, the company may, with the previous approval of the Central Government, appoint another person to that office in accordance with the provision of this Act.]

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1. Substituted by Act 65 of 1960, Section 148, for "310" (w.e.f. 28-12-1960).

2.Inserted by Act 65 of 1960, Section 149 (w.e.f. 28-12-1960).

3. Substituted by Act 17 of 1967, Section 4 and Schedule, for "Tribunal' (w.e.f. 1-7-1967).

4. Substituted by Act 31 of 1988, Section 67, for "High Court" (w.e.f. 31-5-1991).

5. Substituted by Act 11 of 2003, Section 38, for "Company Law Board".

6. Substituted by Act 17 of 1967, section 4 and Schedule for "record a finding" (w.e.f. 1-7-1967).

7. Substituted by Act 17 of 1967, section 4 and Schedule, for "Findings" (w.e.f. 1-7-1967).

8. Substituted by Act 17 of 1967, Section 4 and Schedule, for "Central Government may" (w.e.f. 1-7-1967).

9. Substituted by Act 17 of 1967, Section 4 and Schedule, for "finding of the Tribunal under this Chapter or a decision of a High Court thereon" (w.e.f. 1-7-1967).

10. Proviso omitted by Act 53 of 2000, Section 173 (w.e.f. 13-12-2000).

11. Sub-section (2) omitted by Act 53 of 2000, Section 173 (w.e.f. 13-12-2000).

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[Rep. by the Companies (Amendment) Act, I960 (65 of I960), Section 150(w.e.f. 28-12-1960).]



In sections 391 and 393,-

(a) The expression "company" means any company liable to be wound up under this Act;

(b) The expression "arrangement" includes a reorganization 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, by both those methods; and

(c) Unsecured creditors who may have filed suits or obtained decrees shall be deemed to be of the same class as other unsecured creditors.



(1) Where a compromise or arrangement is proposed-

(a) Between a company and its creditors or any class of them; or

(b) Between a company and its members or any class of them,
the 1*[Tribunal] may, on the application of the company or of any creditor or member of the company or, in the case of a company which is being wound up, of the liquidator, order a meeting of the creditors or class of creditors, or of the members or class of members, as the case may be to be called, held and conducted in such manner as the 1*[Tribunal] directs.

(2) If a majority in number representing three-fourths in value of the creditors, or class of creditors, or members, or class of members as the case may be, present and voting either in person or, where proxies are allowed 2*[under the rules made under section 643], by proxy, at the meeting, agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the 1*[Tribunal], be binding on all the creditors, all the creditors of the class, all the members, or all the members of the class, as the case may be, and also on the company, or, in the case of a company which is being wound up, on the liquidator and contributories of the company:-

3*[Provided that no order sanctioning any compromise or arrangement shall be made by the 1*[Tribunal] unless the 1*[Tribunal] is satisfied that the company or any other person by whom an application has been made under sub-section (1) has disclosed to the court, by affidavit or otherwise, all material facts relating to the company, such as the latest financial position of the company, the latest auditor's report on the accounts of the company, the pendency of any investigation proceedings in relation to the company under sections 235 to 351, and the like.]

(3) An order made by the 1*[Tribunal] under sub-section (2) shall have no effect until a certified copy of the order has been filed with the Registrar.

(4) A copy of every such order shall be annexed to every copy of the memorandum of the company issued after the certified copy of the order has been filed as aforesaid, or in the case of a company not having a memorandum, to every copy so issued of the instrument constituting or defining the constitution of the company.

(5) If default is made in complying with sub-section (4), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to 4*[one hundred rupees] for each copy in respect of which default is made.

(6) The 1*[Tribunal] may, at any time after an application has been made to it under this section stay the commencement or continuation of any suit or proceeding against the company on such terms as the 1*[Tribunal] thinks fit, until the application is finally disposed of.

5 [***]

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1. Substituted by Act 11 of 2003, section 39, for "Court".

2. Inserted by Act 65 of 1960, Section 151 (w.e.f. 28-12-1960).

3. Added by Act 31 of 1965, Section 48 (w.e.f 15-10-1965).

4. Substituted by Act 53 of 2000, Section 174, for "ten rupees" (w.e.f. 13-12-2000).

5. Sub-section (7) omitted by Act 11 of 2003, section 39.

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(1) Where the Tribunal makes an order under section 391 sanctioning a compromise or an arrangement in respect of a company, it-

(a) Shall have power to supervise the carrying out of the compromise or an arrangement; and

(b) May, at the time of making such order or at any time thereafter, give such directions in regard to any matter or make such modifications in the compromise or arrangement as it may consider necessary for the proper working of the compromise or arrangement.

(2) If the Tribunal aforesaid is satisfied that a compromise or an arrangement sanctioned under section 391 cannot be worked satisfactorily with or without modifications, it may, either on its own motion or on the application of any person interested in the affairs of the company, make an order winding up the company, and such an order shall be deemed to be an order made under section 433 of this Act.

(3) The provisions of this section shall, so far as may be, also apply to a company in respect of which an order has been made before the commencement of the Companies (Amendment) Act, 2001 sanctioning a compromise or an arrangement.]

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1. Substituted by Act 11 of 2003, section 40, for section 392 (See Annexe).
 
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(1) Where a meeting of creditors or any class of creditors, or of members or any class of members, is called under section 391, -

(a) With every notice calling the meeting which is sent to a creditor or member, there shall be sent also a statement setting forth the terms of the compromise or arrangement and explaining its effect; and in particular, stating any material interests of the directors, managing director 1 [***] or manager of the company, whether in their capacity as such or as members or creditors of the company or otherwise, and the effect on those interests of the compromise or arrangement if, and in so far as, it is different from the effect on the like interests of other persons; and

(b) In every notice calling the meeting which is given by advertisement, there shall be included either such a statement as aforesaid or a notification of the place at which and the manner in which creditors or members entitled to attend the meeting may obtain copies of such a statement as aforesaid.

(2) Where the compromise or arrangement affects the rights of debenture-holders of the company, the said statement shall give the like information and explanation as respects the trustees of any deed for securing the issue of the debentures as it is required to give as respects the company's directors.

(3) Where a notice given by advertisement includes a notification mat copies of a statement setting forth the terms of the compromise or arrangement proposed and explaining its effect can be obtained by creditors or members entitled to attend the meeting, every creditor or member so entitled shall, on making an application in the manner indicated by the notice, be furnished by the company, free of charge, with a copy of the statement.

(4) Where default is made in complying with any of the requirements of this section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to 2*[fifty thousand rupees] ; and for the purpose of (his sub-section any liquidator of the company and any trustee of a deed for securing the issue of debentures of the company shall be deemed to be an officer of the company:-

Provided
that a person shall not be punishable under this sub-section if he shows that the default was due to the refusal of any other person, being a director, managing director, 1 [***] manager or trustee for debenture holders, to supply the necessary particulars as to his material interests.

(5) Every director, managing director, 1[***] or manager of the company, and every trustee for debenture holders of the company, shall give notice to the company of such matters relating to himself as may be necessary for the purposes of this section; and if he fails to do so, he shall be punishable with fine which may extend to 3*[five thousand rupees].

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1. The words "managing agent, secretaries and treasurers," omitted by Act 53 of 2000, Section 175 (w.e.f. 13-12-2000).

2. Substituted by Act 53 of 2000, Section 175, for "five thousand rupees" (w.e.f. 13-12-2000).

3. Substituted by Act 53 of 2000, Section 175, for "five hundred rupees" (w.e.f. 13-12-2000).

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(1) Where an application is made to the 1*[Tribunal] under section 391 for the sanctioning of a compromise or arrangement proposed between a company and any such persons as are mentioned in that section, and it is shown to the 1*[Tribunal] -

(a) That the compromise or arrangement has been proposed for the purposes of, or in connection with, a scheme for the reconstruction of any company or companies, or the amalgamation of any two or more companies; and

(b) That under the scheme the whole or any part of the under taking, property or liabilities of any company concerned in the scheme (in this section referred to as a "transferor company") is to be transferred to another company (in this section referred to as "the transferee company"); the 1*[Tribunal] may, either by the order sanctioning the compromise or arrangement or by a subsequent order, make provision for all or any of the following matters:-

(i) The transfer to the transferee company of the whole or any part of the undertaking, property or liabilities of any transferor company;

(ii) The allotment or appropriation by the transferee company of any shares, debentures policies, or other like interests in that company which, under the compromise or arrangement, are to be allotted or appropriated by that company to or for any person;

(iii) The continuation by or against the transferee company of any legal proceedings pending by or against any transferor company;

(iv) The dissolution, without winding up, of any transferor company;

(v) The provision to be made for any persons who, within such time and in such manner as the 1*[Tribunal] directs dissent from the compromise or arrangement; and

(vi) Such incidental, consequential and supplemental matters as are necessary to secure that the reconstruction or amalgamation shall be fully and effectively carried out:-

2*[Provided that no compromise or arrangement proposed for the purposes of, or in connection with, a scheme for the amalgamation of a company, which is being wound up, with any other company or companies; shall be sanctioned by the 1*[Tribunal] unless the 1 [Tribunal] has received a report from the 3[***] the Registrar that the affairs of the company have not been conducted in a manner prejudicial to the interests of its members or to public interest:-

Provided further that no order for the dissolution of any transferor company under clause (iv) shall be made by the 1*[Tribunal] unless the Official Liquidator has, on scrutiny of the books and papers of the company, made a report to the 1*[Tribunal] that the affairs of the company have not been conducted in a manner prejudicial to the interests of its members or to public interest.]

(2) Where an order under this section provides for the transfer of any property or liabilities, then, by virtue of the order; that properly shall be transferred to and vest in and those liabilities shall be transferred to and become the liabilities of the transferee company and in the case of any property, if the order so directs, freed from any charge which is, by virtue of the compromise or arrangement, to cease to have effect.

(3) Within 4*[thirty] days after the making of an order under this section, every company in relation to which the order is made shall cause a certified copy thereof to be filed with the Registrar for registration.

If default is made in complying with this sub-section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to 5*[five hundred rupees] .

(4) In this section -

(a) "Property" includes property rights and powers of every description; and "liabilities" includes duties of every description; and

(b) "Transferee company" does not include any company other than a company within the meaning of this Act; but "transferor company" includes anybody corporate, whether a company within the meaning of this Act or not.

394A - 6*Notice to be given to Central Government for applications under sections 391 and 394

The7*[Tribunal] shall give notice of every application made to it under section 391 or 394 to the Central Government, and shall take into consideration the representations, if any, made to it by that Government before passing any order under any of these sections.]

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1. Substituted by Act 11 of 2003, Section 41, for "Court".

2. Added by Act 31 of 1965, Section 49 (w.e.f. 15-10-1965).

3. The words "the Company Law Board or" omitted by Act 11 of 2003, Section 41.

4. Substituted by Act 31 of 1965, Section 62 and Schedule, for "fourteen" (w.e.f. 15-10-1965).

5. Substituted by Act 53 of 2000, Section 176, for "fifty rupees" (w.e.f. 13-12-2000).

6.Inserted by Act 31 of 1965, Section 50 (w.e.f. 15-10-1965).

7.Substituted by Act 11 of 2003, Section 42, for "Court".

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(1) Where a scheme or contract involving the transfer of shares or any class of shares in a company (in this section referred to as "the transferor company") to another company (in this section referred to as "the transferee company"), has, within four months after the making of the offer in mat behalf by the transferee company, been approved by the holders of not less than nine-tenths in value of the shares whose transfer is involved (other than shares already held at the date of the offer by, or by a nominee for, the transferee company or its subsidiary), the transferee company may, at any time within two months after the expiry of the said four months, give notice in the prescribed manner to any dissenting shareholder, that it desires to acquire his shares; and when such a notice is given, the transferee company shall, unless, on an application made by the dissenting shareholder within one month from the date on which the notice was given the1*[Tribunal] thinks fit to order otherwise, be entitled and bound to acquire those shares on the terms on which, under the scheme or contract, the shares of the approving shareholders are to be transferred to the transferee company:-

Provided that where shares in the transferor company of the same class as the shares whose transfer is involved are already held as aforesaid to a value greater than one-tenth of the aggregate of the values of all the shares in the company of such class, the foregoing provisions of this sub-section shall not apply, unless -

(a) The transferee company offers the same terms to all holders of the shares of that class (other than those already held as aforesaid) whose transfer is involved; and

(b) The holders who approve the scheme or contract besides holding not less than nine-tenths in value of the shares (other than those already held as aforesaid) whose transfer is involved, are not less than three-fourths in number of the holders of those shares.

(2) Where, in pursuance of any such scheme or contract as aforesaid, shares, or shares of any class, in a company are transferred to another company or its nominee, and those shares together with any other shares or any other shares of the same class, as the case may be, in the first-mentioned company held at the date of the transfer by, or by a nominee for, the transferee company or its subsidiary comprise nine-tenths in value of the shares, or the shares of that class, as the case may be, in the first-mentioned company, then -

(a) The transferee company shall, within one month from the date of the transfer (unless on a previous transfer in pursuance of the scheme or contract it has already complied with this requirement), give notice of that fact in the prescribed manner to the holders of the remaining shares or of the remaining shares of that class, as the case may be, who have not assented to the scheme or contract; and

(b) Any such holder may, within three months from the giving of the notice to hi m, require the transferee company to acquire the shares in question;and where a shareholder gives notice under clause (b) with respect to any shares, the Transferee company shall be entitled and bound to acquire those shares on the terms on which, under the scheme or contract, the shares of the approving shareholders were transferred to it, or on such other terms as may be agreed, or as the1*[Tribunal] on the application of either the transferee company or the shareholder thinks fit to order.

(3) Where a notice has been given by the transferee company under sub-section (1) and the1*[Tribunal] has not, on an application made by the dissenting shareholder, made an order to the contrary, the transferee company shall, on the expiry of one month from the date on which the notice has been given, or, if an application to the1*[Tribunal] by the dissenting shareholder is then pending, after that application has been disposed of, transmit a copy of the notice to the transferor company together with an instrument of transfer executed on behalf of the shareholder by any person appointed by the transferee company and on its own behalf by the transferee company, and pay or transfer to the transferor company the amount or other consideration representing the price payable by the transferee company for the shares which, by virtue of this section, that company is entitled to acquire; and 2*[the transferor company shall -

(a) Thereupon register the transferee company as the holder of those shares, and

(b) Within one month of the date of such registration, inform the dissenting shareholders of the fact of such registration and of the receipt of the amount or other consideration representing the price payable to them by the transferee company:]

Provided that an instrument of transfer shall not be required for any share for which a share warrant is for the time being outstanding.

(4) Any sums received by the transferor company under this section shall be paid into a separate bank account, and any such sums and any other consideration so received shall be held by that company in trust for the several persons entitled to the shares in respect of which the said sums or other consideration were respectively received.

3*[(4A) (a) The following provisions shall apply in relation to every offer of a scheme or contract involving the transfer of shares or any class of shares in the transferor company to the transferee company, namely:-

(i) Every such offer or every circular containing such offer or every recommendation to the   members of the transferor company by its directors to accept such offer shall be accompanied by such information as may be prescribed;

(ii) Every such offer shall contain a statement by or on behalf of the transferee company, disclosing the steps it has taken to ensure that necessary cash will be available;

(iii) Every circular containing, or recommending acceptance of, such offer shall be presented to the Registrar for registration and no such circular shall be issued until it is so registered;

(iv) The Registrar may refuse to register any such circular which does not contain the information required to be given under sub-clause (i) or which sets out such information in a manner likely to give a false impression; and

(v) An appeal shall lie to the 1*[Tribunal] against an order of the Registrar refusing to register any such circular.

(b) Whoever issues a circular referred to in sub-clause (iii) of clause (a) which has not been registered, shall be punishable with fine which may extend to4*[five thousand rupees].

(5) In this section -

(a) "Dissenting shareholder" includes a shareholder who has not assented to the scheme or contract and any shareholder who has failed or refused to transfer his shares to the transferee company in accordance with the scheme or contract;

(b) "Transferor company" and "transferee company" shall have the same meaning as in section 394.

(6) In relation to an offer made by the transferee company to shareholders of the transferor company before the commencement of this Act, this section shall have effect -

(a) With the substitution, in sub-section (1), for the words "the shares whose transfer is involved (other than shares already held at the date of the offer by, or by a nominee for, the transferee company or its subsidiary)," of the words "the shares affected" and with the omission of the proviso to that sub-section;

(b) With the omission of sub-section (2);

(c) With the omission in sub-section (3) of the words "together with an instrument of transfer executed on behalf of the shareholder by any person appointed by the transferee company and on its own behalf by the transferee company" and of the proviso to that sub-section; and

(d) With the omission of clause (b) of sub-section (5).

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1.Substituted by Act 11 of 2003, Section 42, for "Court".

2.Substituted by Act 31 of 1965, Section 51, for certain words (w.e.f. 15-10-1965).

3.Inserted by Act 31 of 1965, Section 51 (w.e.f. 15-10-1965).

4.Substituted by Act 53 of 2000, Section 177, for "five hundred rupees" (w.e.f. 13-12-2000).

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(1) Where the Central Government is satisfied that it is essential in the 1*[public interest] that two or more companies should amalgamate, then, notwithstanding anything contained in sections 394 and 395 but subject to the provisions of this section, the Central Government may, by order notified in the Official Gazette, provide for the amalgamation of those companies into a single company with such constitution; with such property, powers, rights, interests, authorities and privileges; and with such liabilities, duties, and obligations; as may be specified in the order.

(2) 2*[The order aforesaid may provide for the continuation by or against the transferee company of any legal proceedings pending by or against any transferor company and may also] contain such consequential, incidental and supplemental provisions as may, in the opinion of the Central Government be necessary to give effect to the amalgamation.

(3) Every member or creditor (including a debenture holder) of each of the companies before the amalgamation shall have, as nearly as may be, the same interest in or rights against the company resulting from the amalgamation as he had in the company of which he was originally a member or creditor; and to the extent to which the interest or rights of such member or creditor in or against the company resulting from the amalgamation are less than his interest in or rights against the original company, he shall be entitled to compensation which shall be assessed by such authority 3*[as may be prescribed and every such assessment shall be published in the Official Gazette]. The compensation so assessed shall be paid to the member, or creditor concerned by the company resulting from the amalgamation.

4*[(3A) Any person aggrieved by any assessment of compensation made by the prescribed authority under sub-section (3) may, within thirty days from the date of publication of such assessment in the Official Gazette, prefer an appeal to the 5*[Tribunal] and thereupon the assessment of the compensation shall be made by the 5*[Tribunal].]

(4) No order shall be made under this section, unless -

(a) A copy of the proposed order has been sent in draft to each of the companies concerned; 6 [***]

4*[(aa) The time for preferring an appeal under sub-section (3A) has expired, or where any such appeal has been preferred, the appeal has been finally disposed of; and]

(b) The Central Government has considered, and made such modifications, if any, in !he draft order as may seem to it desirable in the light of any suggestions and objections which may be received by it from any such company within such period as the Central Government may fix in that behalf, not being less than two months from the date on which the copy aforesaid is received by that company, or from any class of shareholders therein, or from any creditors or any class of creditors thereof.

(5) Copies of every order made under this section shall, as soon as may be after it has been made, be laid before both Houses of Parliament.

396A - 7* Preservation of books and papers of amalgamated company

The books and papers of a company which has been amalgamated with, or whose shares have been acquired by, another company under this Chapter shall not be disposed of without the prior permission of the Central Government and before granting such permission, that Government may appoint a person to examine the books and papers or any of them for the purpose of ascertaining whether they contain any evidence of the commission of an offence in connection with the promotion or formation, or the management of the affairs, of the first-mentioned company or its amalgamation or the acquisition of its shares.]

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1. Substituted by Act 65 of 1960, Section 152, for "national interest" (w.e.f. 28-12-1960).

2. Substituted by Act 35 of 1985, Section 3 for "The order aforesaid may" (w.e.f. 24-5-1985).

3. Substituted by Act 35 of 1985, Section 3 for "as may be prescribed" (w.e.f. 24-5-1985).

4. Inserted by Act 35 of 1985, Section 3 (w.e.f. 24-5-1985).

5. Substituted by Act 11 of 2003, Section 43, for "Company Law Board".

6. The words "and" omitted by Act 35 of 1985, Section 3 (w.e.f. 24-5-1985).

7. Inserted by Act 31 of 1965, Section 52 (w.e.f. 15-10-1965).

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(1) Any member of a company who complain that the affairs of the company2*[are being conducted in a manner prejudicial to public interest or] in a manner oppressive to any member or members (including any one or more of themselves) may apply to the1*[Tribunal] for an order under this section, provided such members have a right so to apply in virtue of section 399.
(2) If, on any application under sub-section (1), the court is of opinion -

(a) That the company's affairs2*[are being conducted in a manner prejudicial to public interest or] in a manner oppressive to any member or members; and

(b) That to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding-up order on the ground that it was just and equitable that the company should be wound up ,the1*[Tribunal] may, with a view to bringing to an end the matters complained of, make such order as it thinks fit.

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1. Substituted by Act 31 of 19 65 , Section 67, for "Court" (w.e.f. 31-5-1991) and again Substituted by Act 11 of 2003, Section 44 for "Company Law Board".

2.Substituted by Act 53 of 1963, Section 10, for "are being conducted" (w.e.f. 1-1-1964).

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(1) Any members of a company who complain -

(a) That the affairs of the company2*[are being conducted in a manner prejudicial to public interest or] in a manner prejudicial to the interests of the company; or

(b) That a material change not being a change brought about by, or in the interests of, any creditors including debenture holders, or any class of shareholders, of the company) has taken place in the management or control of the company, whether by an alteration in its Board of directors,3[***]4*[or manager],5[***] or in the ownership of the company's shares, or if it has no share capital, in its membership, or in any other manner whatsoever, and that by reason of such change, if is likely that the affairs of the company6*[will be conducted in a manner prejudicial to public interest or]in a manner prejudicial to the interests of the company;
may apply to the1*[Tribunal] for an order under this section, provided such members have a right so to apply in virtue of section 399.

(2) If, on any application under sub-section (1), the1*[Tribunal] is of opinion that the affairs of the company are being conducted as aforesaid or that by reason of any material change as aforesaid in the management or control of the company, it is likely that the affairs of the company will be conducted as aforesaid, the 1*[Tribunal] may, with a view to bringing to an end or preventing the matters complained of or apprehended, make such order as it thinks fit.

-------------------------------------------------------------------------------------------------------------------------------------------------------

1.Substituted by Act 31 of 1988, Section 67, for "Court" (w.e.f. 31-5-1991) and again  Substituted by Act 11 of 2003, Section 44, for "Company Law Board".

2.Substituted by Act 53 of 1963, Section 11, for "are being conducted" (w.e.f. 1-1-1964).

3 . The words "or of its managing agent or secretaries and treasurers," omitted by Act 53 of 2000, Section 178 (w.e.f. 13-12-2000).

4 . Inserted by Act 65 of 1960, Section 153 (w.e.f. 28-12-1960).

5 . Certain words omitted by Act 53 of 2000, Section 178 (w.e.f. 13-12-2000).

6 . Substituted by Act 53 of 1963, Section 11, for "will be conducted" (w.e.f. 1-1-1964).

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(1) The following members of a company shall have the right to apply under section 397 or 398:-

(a) In the case of a company having a share capital, not less than one hundred members of the company or not less than one-tenth of the total number of its members, whichever is less or any members or members holding not less than one-tenth of the issued share capital of the company, provided that the applicant or applicants have paid all calls and other sums due on their shares;

(b) In the case of a company not having a share capital, not less than one-fifth of the total number of its members.

(2) For the purposes of sub-section (1), where any share or shares are held by two or more persons jointly, they shall be counted only as one member.

(3) Where any members of a company are entitled to make an application in virtue of sub-section (1), any one or more of them having obtained the consent in writing of the rest, may make the application on behalf and for the benefit of all of them.

(4) The Central Government may, if in its opinion circumstances exist which make it just and equitable so to do, authorise any member or members of the company to apply to the1*[Tribunal] under section 397 or 398, notwithstanding that the requirements of clause (a) or clause (b), as the case may be, of sub-section (1) are not fulfilled.

(5) The Central Government may, before authorising any member or members as aforesaid, require such member or members to give security for such amount as the Central Government may deem reasonable, for the payment of any costs which the1*[Tribunal] dealing with the application may order such member or members to pay to any other person or persons who are parties to the application.

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1. Substituted by Act 31 of 1988, Section 67, for "Court" (w.e.f. 31-5-1991) and again Substituted by Act 11 of 2003, Section 44 for "Company Law Board".

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The1*[Tribunal] shall give notice of every application made to it under section 397 or 398 to the Central Government, and shall take into consideration the representation, if any, made to it by that Government before passing a final order under that section.

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1. Substituted by Act 31 of 1988, Section 67, for "Court" (w.e.f. 31- 5-1991) and again Substituted by Act 11 of 2003, Section 44 for "Company Law Board".

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Last updated on September, 2016

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