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The Companies Act, 1956

Title : The Companies Act, 1956

Year : 1956



A copy of any report of any inspector or inspectors appointed under section 235 or 237 authenticated in such manner, of any, as may be prescribed, shall be admissible in any legal proceeding as evidence of the opinion of the inspector or inspectors in relation to any matter contained in the report.



(1) Where it appears to the Central Government that there is good reason so to do it may appoint one or more inspectors to investigate and report on the membership of any company and other mailers relating to the company, for the purpose of determining the true persons -

(a) Who are or have been financially interested in the success or failure, whether real or apparent, of the company; or

(b) Who are or have been able to control or materially to influence the policy of the company.

1*[(1A) Without prejudice to its powers under this section, the Central Government shall appoint one or more inspectors under sub-section (1), if the 2*[Tribunal] in the course of any proceedings before it, declares by an order that the affairs of the company ought to be investigated as regards the membership of the company and other matters relating to the company, for the purposes of determining the true persons -

(a) Who are or have been financially interested in the success or failure, whether real or apparent, of the company; or

(b) Who are or have been able to control or materially to influence the policy of the company.]

(2) When appointing an inspector under sub-section (1), the Central Government may define the scope of his investigation, whether as respects the matters or the period to which it is to extend or otherwise, and in particular, may limit the investigation to matters connected with particular shares or debentures.

(3) Subject to the terms of an inspector's appointment, his powers shall extend to the investigation of any circumstances suggesting the existence of any arrangement or understanding which, though not legally binding, is or was observed or is likely to be observed in practice and which is relevant to the purposes of his investigation.

3 [***]

(5) For the purposes of any investigation under this section, sections 239, 240 and 241 shall apply with the necessary modifications of references to the affairs of the company or to those of any other body corporate 4[***]

Provided that the said sections shall apply in relation to all persons (including persons concerned only on behalf of others) who are or have been, or whom the inspector has reasonable cause to believe to be or to have been,-

(i) Financially interested in the success or failure, or the apparent success or failure, of the company, or of any other body corporate, 5 [***] whose membership or constitution is investigated with that of the company; or

(ii) Able to control or materially to influence the policy of such company body corporate, 5 [***];as they apply in relation to 6 [officers and other employees and agents] of the company, of the other body corporate, 4 [***]as the case may be: 4 [***]as the case may be:

Provided further
that the Central Government shall not be bound to furnish the company or any oilier person with a copy of any report by an inspector appointed under this section or with a complete copy thereof, if it is of opinion that there is good reason for not divulging the contents of the report or of parts thereof; but in such a case, the Central Government shall cause to be kept by the Registrar a copy of any such report, or as the case may be, of the parts thereof, as respects which it is not of that opinion.

(6) The expenses of any investigation under this section shall be defrayed by the Central Government out of moneys provided by Parliament, unless the Central Government directs that the expenses or any part thereof should be paid by the persons on whose application the investigation was ordered.

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1. Inserted by Act 31 of 1988, Section 41 (w.e.f. 31-5-1991).

2. Substitution by Act 11 of 2003, Section 33, for "Company Law Board".

3. Sub-section (4) omitted by Act 53 of 2000, Section 123 (w.e.f. 13-12-2000).

4. The words "or of any managing agent, secretaries and treasurers, or associate" omitted by Act 53 of 2000, Section 123 (w.e.f. 13-12-2000).

5. The words "managing agent, secretaries and treasurers  or associate," omitted by Act 53 of 2000, Section 123 (w.e.f. 13-12-2000).

6. Substituted by Act 65 of 1960, Section 79, for "officers and agents" (w.e.f. 28-12-1960).

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[Repealed by the Companies (Amendment) Act, 2000 (53 of 2000), Section 124 (w.e.f. 13-12-2000).



[Repealed by the Companies (Amendment) Act, 2000 (53 of 2000), Section 124 (w.e.f. 13-12-2000).



(1) 2*[Where it appears to the 3 [Tribunal], whether on a reference made to it by the Central Government in connection with any investigation under sections 247, 4 [***] or on a complaint made by any person in this behalf] that there is good reason to find out the relevant facts about any shares (whether issued or to be issued) and the 5*[Tribunal] is of the opinion that such facts cannot be found out unless the restrictions specified in sub-section (2) are imposed, the 5*[Tribunal] may, by order, direct that the shares shall be subject to the restrictions imposed by sub-section (2) for such period not exceeding three years as may be specified in the order.

(2) So long as any shares are directed to be subject to the restrictions imposed by this sub-section -

(a) Any transfer of those shares shall be void;

(b) Where those shares are to be issued, they shall not be issued; and any issue thereof or any transfer of the right to be issued therewith shall be void;

(c) No voting right shall be exercisable in respect of those shares;

(d) No further shares shall be issued in right of those shares or in pursuance of any offer made to the holder thereof; and any issue of such shares or any transfer of the right to be issued therewith, shall be void; and

(e) Except in a liquidation, no payment shall be made of any sums due from the company on those shares, whether in respect of dividend, capital or otherwise.

6*[(3) Where a transfer of shares in a company has taken place and as a result thereof a change in the composition of the Board of directors of the company is likely to take place and the 3*[Tribunal] is of the opinion that any such change would be prejudicial to the public interest, it may, by order, direct that -

(a) The voting rights in respect of those shares shall not be exercisable for such period not exceeding three years as may be specified in the order;

(b) No resolution passed or action taken to effect a change in the composition of the Board of directors before the date of the order shall have effect unless confirmed by the 3*[Tribunal].

(4) Where the 3*[Tribunal] has reasonable ground to believe that a transfer of shares in a company is likely to take place whereby a change in the composition of the Board of directors of the company is likely to take place and the3 [Tribunal] is of the opinion that any such change would be prejudicial to the public interest the 3* [Tribunal] may, by order, direct that any transfer of shares in the company during such period not exceeding three years as may be specified in the order, shall be void.]

(5) The 5*[Tribunal] may, by order at any time, vary or rescind any order made by it under sub-section (1) or sub-section (3) or sub-section (4).

7 [***]

(8) Any order made by the 3 [Tribunal]] under sub-section (5) shall be served on the company within fourteen days of the making of the order.

(9) Any person who -

(a) Exercises or purports to exercise any right to dispose of any shares or of any right to be issued with any such shares when to his knowledge he is not entitled to do so by reason of any of the said restrictions applicable to the case under sub-section (2); or

(b) Votes in respect of any shares whether as holder or proxy, or appoints a proxy to vote in respect thereof, when to his knowledge he is not entitled to do so by reason of any of the said restrictions applicable to the case under sub-section (2) or by reason of any order made under sub-section (3); or

(c) Transfers any shares in contravention of any order made under sub-section (4); or

(d) Being the holder of any shares in respect of which an order under sub-section (2) or sub-section (3) has been made, fails to give notice of the fact of their being subject to any such order to any person whom he does not know to be aware of that fact but whom he knows to be otherwise entitled to vote in respect of those shares, whether as holder or as proxy,shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to8 [fifty thousand rupees], or with both.

(10) Where shares in any company are issued in contravention of such of the restrictions as may be applicable to the case under sub-section (2), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to 8*[fifty thousand rupees].

(11) A prosecution shall not be instituted under this section except by, or with the consent of the Central Government.

(12) This section shall apply in relation to debentures as it applies in relation to shares.]

250A - 9*Voluntary winding up of company, etc., not to stop investigation proceedings

An investigation may be initiated under sections 235, 237, 239 10*[or 247] notwithstanding that-

(a) An application has been made for an order under section 397 or section 398; or

(b) The company has passed a special resolution for voluntary winding up,and no investigation so initialed shall be stopped or suspended by reason only of the fact that an application referred to in clause (a) has been made or a special resolution referred to in clause (b) has been passed.]

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1. Substituted by Act 65 of 1960, Section 80, for section 250 (w.e.f. 28-12-1960).

2. Substituted by Act 31 of 1988, Section 43, for certain words (w.e.f. 31-5-1991).

3. Substituted by Act 11 of 2003, Section 33 for "Company Law Board".

4. The figures and words "248 or 249" omitted by Act 53 of 2000, Section 125 (w.e.f. 13-12-2000).

5. Substituted by Act 31 of 1988, Section 43, for "Central Government" and again substituted by Act 11 of 2003, section 33, for "Company Law Board".

6. Substituted by Act 31 of 1988, Section 43, for sub-sections (3) and (4) (w.e.f. 31-5-1991).

7. Sub-sections (6) and (7) omitted by Act 31 of 1988, Section 43 (w.e.f. 31-5-1991).

8. Substituted by Act 53 of 2000, Section 125, for "five thousand rupees" (w.e.f. 13-12-2000).

9. Inserted by Act 31 of 1965, Section 28 (w.e.f. 15-10-1965).

10. Substituted by Act 53 of 2000, Section 126, for "247, 248 or 249" (w.e.f. 13-12-2000).

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Nothing in sections1*[ 234 to 247 and 250 ] shall require the disclosure to2*[3*[Tribunal] or to the Central Government or to the Registrar or to an inspector appointed by Central Government]-

(a) By a legal adviser, of any privileged communication made to hi m in that capacity, except as respects the name and address of hi s client; or

(b) By the bankers of any company, body corporate,4[***] or other person, referred to in the sections aforesaid, as such bankers of any information as to the affairs of any of their customers other than such company, body corporate,4[***]or person.

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1 . Substituted by Act 53 of 2000, Section 127, for "234 to 250" (w.e.f. 13-12-2000).

2 . Substituted by Act 31 of 1988, Section 44, for certain words (w.e.f. 31-5-1991).

3. Substituted by Act 11 of 2003, Section 33, for "Company Law Board" .

4. Substituted by Act 53 of 2000, Section 127, for "managing agent secretaries and treasurers" (w.e.f. 13-12-2000).

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(1) Every 1*[public company (other than a public company which has become such by virtue of section 43A)]2[***]shall have at least three directors:-

3*[Provided that a public company having, -

(a) A paid-up capital of five crore rupees or more;

(b) One thousand or more small shareholders,may have a director elected by such small shareholders in the manner as may be prescribed.

Explanation. -For the purpose of this sub-section "small shareholders" means a shareholder holding shares of nominal value of twenty thousand rupees or less in a public company to which this section applies.]

(2) Every 4*[other] company 5[***] shall have at least two directors.

(3) The directors of a company collectively are referred to in this Act as the "Board of directors" or "Board".

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1. Substituted by Act 31 of 1965, Section 29, for "public company" (w.e.f. 15-10-1965).

2. The words "and every private company which is a subsidiary of a public company" omitted by Act 65 of 1960, Section 81 (w.e.f. 28-12-1960).

3. Inserted by Act 53 of 2000, Section 128 (w.e.f. 15-10-1965).

4. Substituted by Act 31 of 1965, Section 29, for "private" (w.e.f. 15-10-1965).

5. The words "which is not a subsidiary of a public company" omitted by Act 65 of 1960, Section 81 (w.e.f. 28-12-1960).

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No body corporate, association or firm shall be appointed director of a1[***] company, and only an individual shall be so appointed.

2*[Provided that no company shall appoint or re-appoint any individual as director of the company unless he has been allotted a Director Identification Number under section 266B.].

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1. The words "public or private" omitted by Act 65 of 1960, Section 82 (w.e.f. 28-12-1960).

2. Inserted by Companies (Amendment) Act, 2006 (23 of 2006), w.e.f. 01.11.2006.

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In default of and subject to any regulations in the articles of a company, subscribers of the memorandum who are individuals, shall be deemed to be the directors of the company, until the directors are duly appointed in accordance with section 255.



(1)1*[Unless the articles provide for the retirement of all directors at every annual general meeting, not less than two-thirds] of the total number of directors of a public company, or of a private company which is a subsidiary of a public company, shall -

(a) Be persons whose period of office is liable to determination by retirement of directors by rotation; and

(b) Save as otherwise expressly provided in this Act, be appointed by the company in general meeting.

(2) The remaining directors in the case of any such company, and the directors generally in the case of a private company which is not a subsidiary of a public company, shall in default of and subject to any regulations in the articles of the company, also be appointed by the company in general meeting.

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1. Substituted by Act 65 of 1960, Section 83, for "Not less than two-thirds" (w.e.f. 28-12-1960).

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(1) At the first annual general meeting of a public company, or a private company which is a subsidiary of a public company held next after the date of the general meeting at which the first directors are appointed in accordance with section 255 and at every subsequent annual general meeting, one-third of such of the directors for the time being as are liable to retire by rotation, or if their number is not three or a multiple of three, then, the number nearest to one-third, shall retire from office.

(2) The directors to retire by rotation at every annual general meeting shall be those who have been longest in office since their last appointment, but as between persons who became directors on the same day, those who are to retire shall, in default of and subject to any agreement among themselves, be determined by lot.

(3) At the annual general meeting at which a director retires as aforesaid, the company may fill up the vacancy by appointing the retiring director or some other person thereto.

(4) (a) If the place of the retiring director is not so filled up and the meeting has not expressly resolved not to fill the vacancy, the meeting shall stand adjourned till the same day in the next week, at the same time and place, or if that day is a public holiday, till the next succeeding day which is not a public holiday, at the same time and place.

(b) If at the adjourned meeting also, the place of the retiring director is not filled up and that meeting also has not expressly resolved not to fill the vacancy, the retiring director shall be deemed to have been re-appointed at the adjourned meeting, unless -

(i) At that meeting or at the previous meeting a resolution for the re-appointment of such director has been put to the meeting and lost;

(ii) The retiring director has, by a notice in writing addressed to the company or its Board of directors, expressed hi s unwillingness to be so re-appointed;

(iii) He is not qualified or is disqualified for appointment;

(iv) A resolution, whether special or ordinary, is required for hi s appointment or re-appointment in virtue of any provisions of this Act; or

(v) The proviso to sub-section ( 2 ) of section 2631[***] is applicable to the case.

2[***]

3*[Explanation. -In this section and in section 257, the expression "retiring director" means a director retiring by rotation.]

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1. The words, brackets and figures "or sub-section (3) of section 280" omitted by Act 31 of 1965, section 30 (w.e.f. 15-10-1965).

2. Sub-section (5) omitted by Act 31 of 1965, section 30 (w.e.f. 15-10-1965).

3. Inserted by Act 65 of 1960, section 84 (w.e.f. 28-12-1960).

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(1) A person who is not a retiring director shall, subject to the provisions of this Act, be eligible for appointment to the office of director at any general meeting, if he or some member intending to propose hi m has, not less than fourteen days before the meeting, left at the office of the company a notice in writing under hi s hand signifying hi s candidature for the office of director or the intention of such member to propose hi m as a candidate for that office, as the case may be,1*[along with a deposit of five hundred rupees which shall be refunded to such person or, as the case may be, to such member, if the person succeeds in getting elected as a director.]

2*[(1 A) The company shall inform its members of the candidature of a person for the office of director or the intention of a member to propose such person as a candidate for that office, by serving individual notices on the members not less than seven days before the meeting:-

Provided that it shall not be necessary for the company to serve individual notices upon the members as aforesaid if the company advertises such candidature or intention not less than seven days before the meeting in at least two newspapers circulating in the place where the registered office of the company is located, of which one is published in the English language and the other in the regional language of that place.]

(2) Sub-section (1) shall not apply to a private company, unless it is a subsidiary of a public company.

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1. Inserted by Act 31 of 1988, Section 45 (w.e.f. 15-6-1988).

2. Inserted by Act 65 of 1960, Section 85 (w.e.f. 28-12-1960).

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1[***] Subject to the provisions of sections 252 , 255 and 259 , a company in general meeting may, by ordinary resolution, increase or reduce the number of its directors within the limits fixed in that behalf by its articles.

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1. The brackets and figure "(1) omitted by Act 36 of 1957, Section 3 and Schedule II."

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In the case of a public company or a private company which is a subsidiary of a public company, any increase in the number of its directors, except-

(a) In the case of a company which was in existence on the 21 st day of July, 1951 , an increase which was within the permissible maximum under its articles as in force on that date, and

(b) In the case of a company which came or may come into existence after that date, an increase which is within the permissible maximum under its articles as first registered,shall not have any effect unless approved by the Central Government; and shall become void if, and insofar as, it is disapproved by that Government:-

1*[Provided that where such permissible maximum is twelve or less than twelve, no approval of the Central Government shall be required if the increase in the number of its directors does not make the total number of its directors more than twelve.]

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

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Nothing in sections 255, 258 or 259 shall affect any power conferred on the Board of directors by the articles to appoint additional directors:-

Provided
that such additional directors shall hold office only up to the date of the next annual general meeting of the company:-

Provided further that the number of the directors and additional directors together shall not exceed the maximum strength fixed for the Board by the articles.



Rep. by the Companies (Amendment) Act, 2000 (53 of 2000), sec. 129 (w.e.f. 13-12-2000).



(1) In the case of a public company or a private company which is a subsidiary of a public company, if the office of any director appointed by the company in general meeting is vacated before his term of office will expire in the normal course, the resulting casual vacancy may, in default of and subject to any regulations in the articles of the company, be filled by the Board of directors at a meeting of the Board.

(2) Any person so appointed shall hold office only up to the date up to which the director in whose place he is appointed would have held office if it had not been vacated as aforesaid.



(1) At a general meeting of a public company or of a private company which is a subsidiary of a public company, a motion shall not be made for the appointment of two or more persons as directors of the company by a single resolution, unless a resolution that it shall be so made has first been agreed to by the meeting without any vote being given against it.

(2) A resolution moved in contravention of sub-section ( 1 ) shall be void, whether or not objection was taken at the time to its being so moved:-

Provided that where a resolution so moved is passed, no provision for the automatic re-appointment of1[the director retiring by rotation] in default of another appointment shall apply.

(3) For the purposes of this section, a motion for approving a person's appointment, or for nominating a person for appointment, shall be treated as a motion for hi s appointment.

263A -2*  Sections 177, 255, 256, and 263 not to be apply in relation to companies not carrying business for profit etc.

Nothing contained in sections 177 , 255 , 256 and 263 shall affect any provision in the articles of a company for the election by ballot of all its directors at each annual general meeting if such company does not carry on business for profit or prohibits the payment of a dividend to its members.

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1. Substituted by Act 65 of 1960, Section 87, for "retiring directors" (w.e.f. 28-12-1960).

2. Inserted by Act 65 of 1960, section 88 (w.e.f. 28-12-1960).

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(1) Every person2[other than a director retiring by rotation or otherwise or a person] who has left at the office of the company a notice under section 257 signifying hi s candidature for the office of a director) proposed as a candidate for the office of a director shall sign, and file with the company, hi s consent in writing to act as a director, if appointed.

3*[(2) A person other than-

(a) A director re-appointed after retirement by rotation or immediately on the expiry of hi s term of office, or

(b) An additional or alternate director or a person filling a casual vacancy in the office of a director under section 262 , appointed as a director or re-appointed as an additional or alternate director, immediately on the expiry of hi s term of office, or

(c) A person named as a director of the company under its articles as first registered,shall not act as a director of the company unless he has within thirty days of hi s appointment signed and filed with the Registrar hi s consent in writing to act as such director.]

(3) This section shall not apply to a private company unless it is a subsidiary of a public company.]

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1. Substituted by Act 65 of 1960, Section 89, for section 264 (w.e.f. 28-12-1960).

2. Substituted by Act 31 of 1965, Section 32, for "other than a person" (w.e.f. 15-10-1965).

3. Substituted by Act 31 of 1965, Section 33, for sub-section (2) (w.e.f. 15-10-1965).

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Notwithstanding anything contained in this Act, the articles of a company may provide for the appointment of not less than two-thirds of the total number of the directors of a public company or of a private company which is a subsidiary of a public company, according to the principle of proportional representation, whether by the single transferable vote or by a system of cumulative voting or otherwise, the appointments being made once in every three years and interim casual vacancies being filled in accordance with the provisions, mutatis mutandis, of section 262.
Last updated on August, 2016

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