paper – 4 : corporate laws and secretarial ... – 4 : corporate laws and secretarial practice 59...

PAPER – 4 : CORPORATE LAWS AND SECRETARIAL PRACTICE Answer all questions

Question 1 (a) MNC Limited whose shares are listed on recognized Stock Exchange, are delisted by the

Stock Exchange. The company seeks your advise on the remedies available to the company against the order of the Stock Exchange. Referring to the provisions of the Securities Contracts (Regulation) Act, 1956, advise the company. (5 Marks)

(b) Referring to the provisions of the Securities Contracts (Regulation) Act, 1956: (i) Examine the extent to which the Central Government is empowered to suspend

business of a recognized Stock Exchange. (ii) The Central Government has granted recognition to a Stock Exchange. To what

conditions may such a recognition be subject to? (5 Marks) Answer

(a) Delisting of Securities by Recognised Stock Exchange (Section 21A of the Securities Contracts (Regulation) Act, 1956) Section 21A of the Securities Contracts (Regulation) Act, 1956 describes the following provisions regarding delisting of securities by a recognised stock exchange.

(1) A recognized stock exchange may delist the securities, after recording the reasons therefore, from any recognized stock exchange on any of the ground or grounds as may be prescribed under this Act. Provided that the securities of a company shall not be delisted unless the company concerned has been given a reasonable opportunity of being heard.

(2) A listed company or an aggrieved investor may file an appeal before the Securities Appellate Tribunal against the decision of the recognized stock exchange delisting the securities within fifteen days from the date of the decision of the recognized stock exchange delisting the securities and the provisions of sections 22B to 22E of this Act shall apply, as far as may be, to such appeals;

Provided that the Securities Appellate Tribunal may, if it is satisfied that the company was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding one month.

Accordingly, we should advise MNC Ltd. (b) (i) Power of Central Government to suspend business at a Stock

Exchange(Section 12 of Securities Contracts (Regulations) Act, 1956):- If in the opinion of the Central Government an emergency has arisen and for the

purpose of meeting of the emergency the Central Government considers it expedient to do so, it may, by Notification in the Official Gazette, for reasons to be set out therein, direct a recognized stock exchange to suspend such of its business

Copyright -The Institute of Chartered Accountants of India

FINAL (OLD) EXAMINATION : MAY, 2010

58

for such period not exceeding 7 days and subject to such conditions as may be specified in the notification, and if, in the opinion of the Central Government, the interest of the trade or the public interest requires that the period should be extended, may, by like notification extend the said period from time to time.

Provided that where the period of suspension is to be extended beyond the first period, no notification extending the period of suspension shall be issued unless the Governing Body of the recognized Stock Exchange has been given an opportunity of being head in the matter.

(ii) Conditions of Recognition (Section 4(2) of Securities Contracts (Regulations) Act, 1956)

The conditions imposed may include: (1) Qualification for Membership of the Stock Exchange. (2) Manner in which contracts shall be entered into and enforced as between

members. (3) Representation of Central Government. on the Stock Exchange (not exceeding

3 as nominated by the Central Government.) (4) Maintenance of Accounts of members and their audit by Chartered

Accountants wherever audit is required by the Central Government. Question 2 (a) The Reserve Bank of India receives a complaint that an authorized person has submitted

incorrect statements and information to the Reserve Bank of India in respect of receipt and utilization of Foreign Exchange. Explain the powers of the Reserve Bank of India with regard to inspection of records of the above authorized person in respect of the above complaint.

Referring to the provisions of Foreign Exchange Management Act, 1999, state the duties of the above authorized person. (7 marks)

(b) Referring to the provisions of the Foreign Exchange Management Act, 1999, state the kind of approval required for the following transactions:

(i) M requires U.S. $ 5,000 for remittance towards hire charges of transponders. (ii) D requires U.S. $ 14,000 per annum for donation to Mr. White in U.S.A.

(iii) P requires U.S. $ 2,000 for payment related to call back services of telephones. (iv) XYZ Limited, a company incorporated in India under the Companies Act, 1956,

wants to withdraw U.S. $ 5,00,000 for short-term credit to its overseas office situated in Australia. (7 marks)

Answer (a) Power of Reserve Bank of India to inspect authorised person (Section 12 of the

Foreign Exchange Management Act, 1999):-


PAPER – 4 : CORPORATE LAWS AND SECRETARIAL PRACTICE

59

(1) The Reserve Bank may, at any time, cause an inspection to be made by any officer of the Reserve Bank specially authorized in writing by the Reserve Bank in this behalf, of the business of any authorized person as may appear to it to be necessary or expedient for the purpose of:

(a) verifying the correctness of any statement, information or particulars furnished to the Reserve Bank;

(b) obtaining any information or particulars which such authorized person has failed to furnish on being called upon to do so;

(c) securing compliance with the provisions of this Act or of any rules, regulations, directions or orders made thereunder.

(2) It shall be the duty of every authorized person, and where such person is a company or a firm, every director, partner or other officer of such company or firm, as the case may be, to produce to any officer making an inspection under sub-section (1), such books, accounts and other documents in his custody or power and to furnish any statement or information relating to the affairs of such persons, company or firm as the said officer may require within such time and in such manner as the said officer may direct.

(b) Current Account Transactions (Section 5 of Foreign Exchange Management Act, 1999) Under section 5 of the Foreign Exchange Management Act, 1999, and Rules relating thereto,

some current account transactions require prior approval of the Central Government, some others require the prior approval of the Reserve Bank of India, some are free transactions and some others are prohibited transactions. Accordingly,

(i) It is a current account transaction, where M is required to take approval of the Central Government for drawal of foreign exchange for remittance of hire charges of transponders.

(ii) It is a current account transaction, which requires RBI’s prior approval for donating US $ 14,000 per annum to Mr. White in U.S.A., as the donation amount exceeds the ceiling of US $ 10,000 per annum per beneficiary.

(iii) Withdrawal of foreign exchange for payment related to call back services of telephone is a prohibited transaction. Hence, Mr. P will not succeed in acquiring US $ 2,000 for the said purpose.

(iv) Here, XYZ Limited has to take prior approval of the RBI for withdrawing US $ 5,00,000 for short-term credit to its overseas office situated in Australia.

Question 3 (a) Examining the provisions of the Securities and Exchange Board of India Act, 1992, state

the penalties to which the following shall be subject to: (i) In case of default committed by a registered stock broker, in payment of amount due

to an investor.



60

(ii) In case of a registered broker communicating some unpublished price sensitive information to a person on his request.

(iii) What factors shall the adjudicating officer take into account while adjudging the quantum of penalty under the Act? (8 marks)

(b) (i) The Competition Commission of India(CCI) has received a complaint from a State Government alleging that X Limited and Y Limited have entered into an informal agreement, not enforceable at law, to limit or control production, supply and market, to determine the sale price of their products. Such an action of these companies has an appreciable effect on competition.

Examining the provisions of the Competition Act, 2002: (A) Decide whether the above agreement has appreciable effect on competition. (B) What factors shall the Competition Commission if India consider while taking

the above decision? (C) What orders can the Competition Commission of India pass on completion of

the inquiry? (5 marks) (ii) Explain the provisions of the Competition Act, 2002 relating to the constitution of

benches of the commission under the Act. (3 marks) Answer (a) (i) Penalty for default on the part of Member/Stock Banker (Section 15F of SEBI

Act, 1992) If any person who, is registered as a stock broker under the SEBI Act, 1992: (a) fails to issue contract notes in the form and in the manner specified by the

stock exchange of which such broker is a member, he shall be liable to a penalty not exceeding 5 times the amount for which the contract note was required to be issued by that broker;

(b) fails to delivery any security or fails to make payment of the amount due to the investor in the manner or within the period specified in the regulations, he shall be liable to a penalty of Rs. 1 lac for each day during which such failure continues or Rs. 1 Crore, whichever is less;

(c) changes an amount of brokerage which is in excess of the brokerage may be specified in the regulations, he shall be liable to a penalty of Rs. 1 lac or 5 times the amount of brokerage changed in excess of the specified brokerage, whichever is higher.

(ii) Penalties for insider trading (Section 15G): If any insider who: (i) either on his own behalf or any other person, deals in securities of corporate

on any stock exchange on the basis of any unpublished price sensitive information; or



61

(ii) communicates any unpublished price sensitive information to any person, with or without his request for such information except as required in the ordinary course of business or under any law; or

(iii) counsels, or procures for, any other person to deal in any securities of any body corporate on the basis of unpublished price sensitive information, shall be liable to a penalty Rs. 25 crores or 3 times the amount of profits made out of insider trading, wherever is higher.

(iii) Factors to be taken into account by the Adjudicating Officer (Section 15J) While adjudging the quantum of penalty under Sec. 15J, the, adjudging officer shall

have due regard to the following factors: (1) The amount of disproportionate gain or unfair advantage, wherever

quantifiable, made as a result, of the default; (2) The amount of loss caused to an investor or group of investors as a result of

the default; (3) The repetitive nature of the default.

(b) (i) (A) The term ‘agreement’ as defined in Section 2 (b) of the Competition Act, 2002, includes any arrangement or understanding or action in concert.

(i) whether or not such arrangement, understanding or action is formal or in writing, or

(ii) whether or not such arrangement, understanding or action is intended to be enforceable by legal proceedings.

Thus agreement between X Ltd and Y Ltd satisfies the ingredients of an agreement as per Section 2 (e) of the Act.

(B) Factors to be considered: (1) creation of barriers to new entrants in the market. (2) driving existing competitors out of the market. (3) foreclosure of competition by hindering entry into the market. (4) accrual of benefits to consumers. (5) improvements in production or distribution of goods or provision of

services (C) Orders of CCI: If after enquiry by the Director General, the Commission funds the agreement

entered into by X Ltd. and Y Ltd. are in contravention of section 3, it may pass all or any of the following orders:

(1) direct X Ltd. and Y Ltd. to discontinue and not to reenter such agreement.



62

(2) impose such penalty as it may deem fit which shall not be more than 10% of the average other turnover for the last 3 preceding financial years, upon each of such person or enterprises which are parties to such agreement or abuse;

(3) direct that agreement shall stand modified to the extent and in the manner as may be specified in order by the commission

(4) direct X Ltd and Y Ltd. to abide by such other orders as the commission may pass and comply with the directions including payment of cost, if any.

(5) pass such other orders or issue such directions as it may deem fit. (ii) Constitution of Benches of CCI (Section 22 of the Competition Act, 2002) Section 22 of the Competition Act 2002 contains provisions relating to constitution

of Benches of the Commission and exercise of the jurisdiction, powers and authority of the Commission by such Benches. Sub-Sections (2) and (3) stipulate that each Bench shall consists of two Members of which at least one Member shall be Judicial Member. A Judicial Member shall be a Member who is or has been or is qualified to be a Judge of a High Court. Sub-Section (4) provides that the bench over which the Chairperson presides shall be the Principal Bench and the other Benches shall be known as Additional benches. Sub-Section(5) empowers the Chairperson to constitute one or more benches to be called Mergers Benches, which will exclusively deal with matters referred to in sections 5 and 6 of the Act. Sub-Section (6) empowers the Central Government to specify, by notification, the places at which the Principal Bench and other Benches shall sit.

Question 4 (a) (i) Explain the rules relating to interpretation of the terms ‘Subject to’ and ‘Not

withstanding’ as used in the different provisions of the Acts. What is the effect of the term ‘Not withstanding anything contained in this Act’ used in Section 408 of the Companies Act, 1956 empowering the Central Government to prevent oppression and mismanagement ? (4 marks)

(ii) In what way are the following terms considered as ‘internal aid’ in the interpretation of statutes?

(A) Illustrations (B) Explanation. (4 marks) (b) The Central Government has appointed an Inspector under Section 237 of the

Companies Act, 1956, to investigate into the affairs of ABC Limited. It is alleged by the company that during the course of investigation, Mr. Z, an Assistant Company Secretary has revealed certain confidential information relating to the affairs of the company. The Managing Director of the company, therefore, decided to dispense with the services of Mr. Z.



63

The Managing Director of the company seeks your advise whether the proposed action of the company is in order under the provisions of the Companies Act, 1956. (7 Marks)

Answer (a) (i) Interpretation of Statutes; “Subject to” and “Notwithstanding anything

contained” The word ‘notwithstanding anything contained’ characterize the non obstante

clause. It is generally included to give an overriding effect to the clause over the other. If there is any inconsistency or departure between the non obstante clause and another provision, it is the non obstante clause which will prevail (K. Parasuramaiah Vs. Pakari Lakshman, A/R 1965 AP 220).

But the word ‘subject to’ conveys the idea of a provision yielding place to another provision or provisions to which it is made ‘subject to’. Hence the effect of non obstante clause (i.e. notwithstanding) is the opposite of a provision which states ‘subject to’.

Section 408 of the Companies Act, 1956 opens with the words ‘notwithstanding anything contained in this Act. This is a non obstante clause which vests overriding powers in the Government to nominate directors to prevent mismanagement or oppression (oriental Industrial Investment Corporation Ltd. Vs. Union of India (1981) 52 Com cases 487, 493(Del). This expression indicates that the appointment of directors under this section is not to be controlled by the maximum number or other proportion, if any, fixed by any provisions of the Act. Further, they cannot be removed by the company at general meeting under section 284 of the Companies Act.

(ii) (A) Illustrations: Illustrations form a part of the statute and considered to be of relevance and value in construing the text of the section. However, illustration can not have the effect of modifying the language of the section and can neither curtail nor expand the ambit of the section.

(B) Explanation: An Explanation may be added to include something or to exclude something from it. Explanation should normally be read as to harmonise with and clear up any ambiguity in the main section. It should be construed as to widen the ambit of the section.

(b) Section 635B of the Companies Act, 1956 provides protection to employees of the company against any unilateral disciplinary against them by the company. In the instant case the managing director has decided to dismiss Mr. Z. Before initiating action the company is required to follow the following procedure:

(i) the company shall send by post to the Company Law Board (CLB) previous intimation in writing of the propose action of dismissal of Mr. Z, if the CLB has any objection to the proposed action, it shall send by post notice in writing to the company;



64

(ii) if the company does not receive within 30 days of sending the previous intimation of proposed action against Mr. Z, any notice of objection from the Tribunal, then, and then only, the company may proceed to take proposed action against Mr. Z.

(iii) if the company is dis-satisfied with the objection raised by the Tribunal, it may, within 30 days of the receipt of the notice of the objection, prefer an appeal to the Appellate Tribunal in prescribed manner and on payment of the prescribed fee;

(iv) the decision of the Appellate Tribunal on such appeal is binding on the Tribunal and on the company;

(v) The above is without prejudice to the provisions for the time being in force. Thus both the company and Mr. Z, if aggrieved by the order of the Appellate Tribunal, may have recourse to any other law to seek relief.

Question 5. (a) On 24th January, 2010, the Board of Directors BUI Limited appointed Mr. A as

the company's Sole Selling Agent for a period of 5 years. At the first general meeting of the company, held after the Board meeting, on April 10, 2010, the above appointment was disapproved. Referring to the provisions of the Companies Act, 1956.

(i) State the date from which the above appointment comes to an end. (ii) What would be your answer in case a condition in the above appointment

that "the appointment must be made by the company in General Meeting" was not attached thereto? (8 Marks)

(b) The profits of MJR Company Limited for the financial year 2009-2010 fell considerably due to recession. The Board of Directors of the company, therefore, bonafide did not recommend any dividend for the year. At the Annual General Meeting of the company, a group of shareholders/members objected to the Board's decision and wanted the Board to make recommendation for dividend. On refusal by the Board, the members, who feel oppressed by the Board's decision to skip the dividend, move to the Company Law Board/Tribunal and complain against the Board on the ground of oppression and mismanagement.

Examining the provisions of the Companies Act, 1956, decide: (1) Whether the members contention shall be tenable? (2) Whether the act of Board of Directors not to recommend any dividend shall

amount to oppression and mismanagement? (7 Marks) Answer (a) Appointment of Sole Selling Agent (Section 294(2) of the Companies Act,

1956) According to Section 294(2) of the Companies Act, 1956, the Board of Directors

of BUI Ltd. shall not appoint a sole selling agent for any area except subject to



65

the condition that the appointment shall cease to be valid if it is not approved by the company in the first general meeting held after the date on which the appointment is made.

It has been held that the appointment of a sole selling agent must be made by the company in its general meeting and such clause must be inserted as a mandatory condition in all appointments of sole selling agents; an appointment without such a clause being inserted is void ab-intio (Arante manufacturing Corp. Vs. Bright Bills Private Ltd. 1967 Com/Case 769, Shelagram Jhaigharia Vs National Co. Ltd. 1965 Com. Cas. 706). If the company in the general meeting disapproves the appointment, it shall become invalid from the date of the general meeting.

(i) Thus, appointment of Mr. A as the sole selling agent will come to an end on 10th April 2010.

(ii) Yes, as discussed above, in absence of the above clause, the appointment of Mr. A as the sole selling agent of the company will be void ab-initio.

(b) Oppression & Mismanagement: Under Sections 397 and 398 of the Companies Act, 1956, members may apply to the

Company Law Board/Tribunal in cases of oppression and mismanagement. However, bona fide decisions consistent with the company’s memorandum and articles are not to be equated with mismanagement even if they turn out to be wrong in the circumstances or these cause temporary losses. The court will not permit the machinery created by the sections to be used by the minority for compelling the majority to come to terms, where the company is honestly managed.

Directors’ bona fide decision not to declare dividend and to accumulate available profits into reserves is not mismanagement. (Thomas Vettom (V.J.) v. Kuttanad Rubber Co. Ltd. (1984) 56 Com. Cases 284 (ker).

Thus in the given case, the group of shareholders/members who complain to CLB/Tribunal against the decision of the Board not to declare any dividend and to accumulate available profits into reserves, would not succeed, as the act of directors does not amount to mismanagement. Furthermore, the shareholders cannot compel the Board to recommend a dividend. The Board’s recommendations are placed in the general meeting. The general meeting can reduce the dividend, but cannot even increase the dividend as recommended by the Board. Therefore, the shareholders/members cannot compel the company to declare dividend and cannot charge the directors with oppression or mismanagement.

Applying the above, answers to the question shall be as under: (1) The contention of shareholders/members shall not be tenable. (2) The act of the Board of Directors who acted bona fide, not to recommend any

dividend shall not amount to oppression or mismanagement.



66

Question 6. (a) Prince Ltd., desires to appoint an additional director on its board of directors. The

Articles of the company confer upon the board to exercise the power to appoint such a director. As such M is appointed as an additional director. In the light of the provisions of the Companies Act, 1956, examine:

(i) Whether M can continue as director if the annual general meeting of the company is not held within the stipulated period and is adjourned to a later date?

(ii) Can the power of appointing additional director be exercised by the Annual General Meeting ?

(iii) As the Secretary of the company what checks would you make after M is appointed as an additional director? (8 Marks)

(b) DVJ Limited decide to appoint Mr. A, as its Managing Director for a period of 5 years with effect from 1st May, 2010. A, fulfils all the conditions as specified in Part I and Part II of Schedule XIII of the Companies Act, 1956.

The terms of appointment are as under: (i) Salary Rs. 1 lac per month. (ii) Commission, as may be decided by the Board of Directors of the Company. (iii) Perquisites :

Free Housing Medical reimbursement upto Rs. 10,000 per month. Leave Travel concession for the family. Club Membership Fee. Personal Accident Insurance Rs. 10 lacs. Gratuity; and Provident Fund as per company's policy.

You, being the Secretary of the company, are required to draft a resolution to give effect to the above, assuming that A is already the Managing Director of a public limited company. (7 Marks)

Answer 6 (a) APPOINTMENT OF ADDITIONAL DIRECTOR: Section 260 of the Companies Act, 1956 empowers the Board of Directors, if

authorized 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, and the number of the directors including additional directors shall not exceed the maximum strength fixed for the Board by



67

the Articles. These directors also must acquire the qualification shares within the statutory period of 2 months. The appointment of such directors must be in the interest of the general body of shareholders. (Anantha Lakshmi v. Indian Traders Ltd. A 1953 Mad. 567).

Based on the above provisions answers to the given questions shall be as under: (1) M cannot continue as director till the adjourned AGM, since he can hold the

office of directorship only up to the date of the next AGM. Such an additional director shall vacate his office latest on the date on which the AGM could have been held under S. 166. He cannot continue in the office on the ground that the meeting was not held or could not be called within the time prescribed. (Krishna Prasad Pilani v. Colaba Land Mills Co. 29 Comp. Cas. 273)

(2) Where the articles have conferred the power of appointing additional directors on the Board of Directors, the company in a general meeting is precluded from appointing additional director. (Blair Open Hearth Furnance Co. vs Reigart, (1913) 108 L.T. 665). However, though in ordinary circumstances the company in general meeting is precluded from appointing such directors yet if owning to a deadlock or otherwise there is no board capable of making the necessary appointment the company in a general meeting may do so. (Barrow v. Potter (914) 1 Ch. 895). Therefore, in ordinary circumstances the general meeting cannot exercise the power to appointment additional director. Question on the presence of exceptional circumstances is silent.

(3) As the Secretary of the company the following checks would be made after M is appointed as an additional director:

(a) Whether the appointment was made by the Board? (b) Whether the maximum strength fixed for the Board was not exceeded

by the appointment? (c) Whether the additional directors held office only up to the sate of the

next Annual General Meeting? (b) “Resolved that subject to the approval of the Central Government under Sub-section

(4) of Section 316 of the Companies Act, 1956, Mr. A who full fills the conditions specified in Parts I and Part II of Schedule XIII to the Companies Act, 1956 and who is already the Managing Director of ___ public limited company, be and is hereby appointed as Managing Director of DVJ Limited for a period of five years commencing from 1st May, 2010, with the consent of all the Directors present at the meeting of which meeting and the resolution to be moved there at specific notice was given to all the directors then in India, on the terms and conditions in the draft agreement tabled before the meeting and initialled by the Chairman for purposes of identification and that Shri ___, the Secretary of the company be and is hereby authorised to apply to the Central Government for seeking their approval.



68

Resolved further that Shri ___, Director and Shri ___ the Secretary of the company be and are hereby authorised to execute the said agreement subject to such modifications/alterations made by the Central Government while giving their approval and to affix the common seal of the company thereon.”

Question 7. (a) ADJ Company Limited has 10 directors on its board. Two of the directors have

retired by rotation at an Annual General Meeting. The place of retiring directors is not so filled up and the meeting has also not expressly resolved 'not to fill the vacancy'. Since the AGM could not complete its business, it is adjourned to a later date. At this adjourned meeting also the place of retiring directors could not be filled up, and the meeting has also not expressly resolved 'not to fill the vacancy'.

Referring to the provisions of the Companies Act, 1956, decide: (i) Whether in such a situation the retiring directors shall be deemed to have

been re-appointed at the adjourned meeting? (ii) What will be your answer in case at the adjourned meeting, the resolutions

for re-appointment of these directors were lost? (iii) Whether such directors can continue in case the directors do not call the

Annual General Meeting? (8 Marks) (b) The Official Liquidator of a public company in liquidation instituted misfeasance

proceedings against the Managing Director of the company. During the pendency of the proceedings in the High Court, the Managing Director died. The Official Liquidator has applied to the court that the legal representatives of the Managing Director be impleaded in the place of the deceased Managing Director and the proceedings be continued.

Examining the provisions of the Companies Act, 1956 decide whether the contention of the Official Liquidator be tenable. (7 Marks)

Answer (a) RETIRING DIRECTOR – TO BE DEEMED DIRECTOR In accordance with the provision of the Companies Act, 1956, as contained in

Section 256(3) at the Annual General Meeting at which a director retires as aforesaid, the company may fill up the vacancy by re-appointing the retiring director or some other person thereto. If the place of retiring director is not so filled up and the meeting has not expressly resolved not to fill the vacancy, the meeting shall stand adjourned to 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. If at the adjourned meeting also, the place of the retiring 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



69

adjourned meeting, unless at the adjourned meeting or at the previous meeting a resolution for the re-appointment of such directors was put and lost.

Therefore, in the given circumstances answer to the questions as asked shall be: (1) In the first case, applying the above provisions, the retiring directors shall be

deemed to have been re-appointed. (2) In the second case, where the resolutions were lost, the retiring directors

shall not be deemed to have been re-appointed. (3) In the third case the directors due to retire shall vacate their offices latest on

the date on which AGM was to be held. (B.R. Kundra v. Motion Pictures Association, 1976, 46 Comp. Cas. 339)

(b) The fact of the instant case are similar to those in Official Liquidator Vs. Parthasarthy Sinha (19830 53 Comp. cas. 163 (SC) wherein it was held that misfeasance proceedings initiated under section 543 of the Companies Act, against a director of a company in a winding up can be continued on his death against his heirs and legal representatives for the purpose of determining and declaring the loss or damage caused to the company. Misfeasance means grave breach of duty of abuse of power usually associated with taking undue benefit or advantage at the cost of the company. However, the liability of legal heirs or legal representatives will be restricted to the value of properties of the managing director in their possession.


paper – 4 : corporate laws and secretarial ... – 4 : corporate laws and secretarial practice 59...

Documents