Negotiable Instrument Act 1881

NEOGOTIABLE INSTRUMENT ACT 1881

A) Definition:
Section 13 of Negotiable Instrument Act 1881 defines a negotiable instrument as “ A negotiable instrument means a promissory note, bills of exchange or cheque payable either to order or to bearer” [Sec 13(1).

Negotiable literally means ‘transferable’. Instrument means a document. TheNegotiable Instrument means a transferable instrument.

B) Characteristics of A Negotiable Instrument:

Property: The possessor of the instrument is the holder and owner thereof. A negotiable instrument does not merely give possession of the instrument, but right to property. The complete right of ownership in a negotiable instrument passes by a mere delivery where instrument is payable to bearer.

Defects in title: The holder in good faith and for value called the ‘holder in due course’ gets the instrument free from all defects of any previous holder.

Remedy: The holder can sue upon the negotiable instrument in his own name. All prior parties are liable to him. A holder in due course can recover the full amount on the instrument.

Rights: The holder in due course is not affected by certain defences, which might be available against previous holder for example fraud to which he is not party.

Payable to order: A promissory note, bill of exchange is payable to order which is expected to be. So payable or which is expressed to be payable to a particular person.

Payable to bearer: Where the negotiable instrument is payable to bearer, the property in it passes from one person to another by delivery.

Payment: A negotiable instrument may be made payable to two or more payees jointly, or in may be made payable in the alternative to one or two, or some of several payees [sec 13(2)]

Consideration: Consideration in the case of a negotiable instrument is presumed. Every such instrument, when it has been accepted, negotiated or transferred, was accepted endorsed, negotiated or transferred for consideration.

D) PROMISSORY NOTE (Sec.4)

I) Definition: Sec 4 of Negotiable Instrument Act 1881 defines a promissory note as “an instrument in writing containing an unconditional undertaking, signed by the maker to pay a certain sum of money only to or to the order of a certain person or to the bearer of the instrument”.

The person who promise to pay is called the “maker”. The person who is promised the payment is called the “ payee”.

II) Essential Elements of a Promissory Note

a) In writing: A promissory note must be in writing. Oral engagement or promise is excluded. It may be written in ink or pencil or may be printed. The intention to make a note must be clear.
b) Undertaking to pay: It is not necessary to use the word “promise” but the intention must be clearly shown an unconditional undertaking to pay the amount.
c) Unconditional: It must contain definite and an unconditional undertaking to pay. Promise to pay should be unconditional. A conditional instrument is invalid. It must be certain of payment.
d) Signed by the maker: The instrument must be signed by the maker thereof. The sign or a mark would constitute signature, if the maker intended to subscribe to the document. Person must sign with his free consent. It should not only be a physical act but also a mental act with an intention to sign.
e) Certain persons: The maker and payee of the instrument must be certain and definite persons. A note may be made by several persons jointly to bind themselves jointly or severally.
f) Specific sum: The sum promised must be certain and specific. Uncertain amount will make the instrument invalid.
g) Stamping: Promissory notes are chargeable with stamp duty. It is advisable to cancel the stamps with maker’s signature or intials. An unstamped or improperly or insufficiently stamped promissory not is not admissible in evidence. No suit can be maintained upon an unstamped or improperly stamped promissory note.

Specimen of Promissory Notes

ABC
Mumbai – 400016
Rs. 1,00,000/-
6th September 2007
Three months after date I promise to pay XYZ or his order a sum of Rupees One Lakh only for the value received.
Sd/-
ABC
To,
XYZ
Mumbai - 400031

BILLLS OF EXCHANGE (Sec.5)

I) Definition: Section 5 of Negotiable Instrument Act 1881 Act defines a bill of exchange as “an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay, a certain sum of money only, to or to the order of a certain person or the bearer of the instrument.”

II) ESSENTIAL ELEMENTS OF A BILL EXCHANGE:

Writing: It must be in writing and may be in any language, and in any form.

Parties: There must be three parties to the bill of exchange, for example, Drawer, Drawee and Payee. The person who draws a bill is called ‘Drawer’ or ‘Maker’. The person on whom the bill is drawn is called a ‘Drawee’ and the person to whom the money is to be paid is called a ‘Payee’.

Order to pay: The bill of exchange must contain an ‘order by the drawer to the drawee to pay’ under any circumstance. The order must be imperative and not in the form of excessive request.

Unconditional: The order in the bill must be unconditional, for example, payable under all events and circumstances.

Signed by the Maker: The bill must be signed by the drawer. A bill without signature is incomplete.

Person directed must be certain: The order to pay must be directed to a certain person. Certainty of the drawee helps the payee to present the bill for acceptance or payment to certain person.

Money: The order must be to pay money only.
Payee must be certain: It must payable to a definite person or his order. The payee must be certain. Bill may be made payable to two or more payees jointly or in the alternative.

Certain sum: The sum payable must be certain. The sum payable may be ‘certain’ although it includes future interest or is payable at an indicated rate of exchange, or is according to the course of exchange.

Stamping: Bill of Exchange is chargeable with stamp duty.

Specimen of Bills of Exchange

XYZ
Mumbai – 400016
Rs. 5,000/-
6th September 2007
Sixty days after date pay to ABC or order the sum of Rupees Five Thousand only for value received.
Sd/-
XYZ
To, Accepted
PQR Sd/-
Mumbai – 400031 PQR

F) CHEQUE (Sec.6)
I) Definition: A cheque is a ‘bill of exchange’ drawn on a specified banker and not expressed to be payable otherwise than on demand. It includes the electronic image of a truncated cheque and a cheque in the electronic form.

II) ESSENTIAL CHARACTERISTICS OF TA CHEQUE:
The following are the essential characteristics of a cheque:
1) A cheque must be in writing.
2) There should be an express order to pay and not a request to pay money.
3) The order must be definite and unconditional.
4) The cheque must be signed by the drawer.
5) The order must be to pay a certain amount of money only.
6) There should be three parties i.e. drawer, drawee and payee which must be certain and must be stated clearly in the instrument.
7) A cheque is always drawn upon a specified banker.
8) A cheque should always be payable on demand.

Specimen of a Cheque
S/B 06.09.2007
PAY………………………………………………………………………………………………
…………………………………………………………………………………OR BEARER
RUPEES…………………………………………………………………………………………

Rs.


A/c No.

THE BANK OF INDIA Sd/-
MUMBAI XYZ
340218 400013020


III) CROSSING OF CHEQUES:
Section 123 to 131 of the Negotiable Instrument Act 1881 provide for crossing of chques.
1) Meaning of Crossing: A cheques is said to be crossed when it bears across its face two parallel transverse lines which are usually drawn on the left hand top corner of the cheque. It is an alteration which is authorised by the Act.

2) Purpose of Crossing: The general purpose of crossing is to direct the drawee (banker) to pay the amount of cheque only to a banker so that party to whose account is credited can be easily traced or identified in case of need.

3) Types of Crossing: There are two types of crossing general crossing and special crossing:
(a) General Crossing (sec 123 & 126): A cheque is said to be crossed generally when ;
i. it has two transverse parallel lines marked across its face; or
ii. it bears an abbreviation “& Co.” between the transverse parallel lines; or
iii. it bears the words “not negotiable” between the two parallel lines
Specimens of General Crossing

(b) Special Crossing: A cheque is said to be crossed specially when it bears across its face the name of a banker without lines or between two parallel lines as under:





(c) Cheque crossed ‘A/c. Payee’: The words “A/c Payee” are sometime entered on the face of a cheque crossed whether generally or specially as under:








Classification of Negotiable Instrument

1) Accommodation bill (Sec.43):
When a bill of exchange is drawn, accepted, or endorsed without consideration, it is called an “accommodation bill”.
Eg: A is need of Rs.10,000/-. He approached his friend B for borrowing the amount. As B is not in a position to lend, he suggests that A might draw a bill on B, which he would accept. It A’s credit is good, he would get the bill discounted with his banker. On the due date, A would pay Rs.10,000/- to B, who would meet the bill.
The person who signs, accept or endorses a bill without receiving any consideration is said to have lent his name to an ‘Accommodation Bill’.
The person who so draws, accepts, endorses, or accommodates is called “Accommodation Party”.

2) Ambiguous Instruments (Sec. 17 & 18)
An instrument which is vague and cannot be clearly identified either as a promissory note or as bill of exchange, is an ambiguous instrument. Where an instrument may be construed either as a promissory note or a bill of exchange, the holder may at his option treat it as either, and the instrument shall henceforth shall be treated accordingly.
If the amount undertaken or ordered to be paid is stated differently in figures and in words, the amount stated in words shall be the amount undertaken or ordered to be paid (sec.18).

3) Foreign Instrument (Sec. 12)
The Foreign Instrument is one which is –
a) Instrument drawn and made payable outside India.
b) Instrument drawn in India, upon persons resident outside India and payable outside India.
Foreign bills of exchange must be protested for dishonour when such protest is required by the law of the place where they drawn.

4) Inland Instrument (Sec. 11)
A promissory note, bill of exchange or cheque drawn or made in India and made payable in, or drawn upon any person resident in India shall be deemed to be an inland instrument.

Following instruments are inland instruments:
i) An instrument drawn and made payable in India;
ii) An instrument drawn in India, upon some person resident in India, though payable in a foreign country;

5) Inchoate Stamped Instrument (Sec. 20)
An inchoate stamped instrument is an incomplete instrument. Sec. 20 lays down: “ Where one person signs and delivers to another a paper stamped in accordance with the law relating to negotiable instruments then in force in India, and either wholly blank or having written thereon an incomplete negotiable instrument, he thereby gives prima facie authority to the holder thereof to make or complete, as the case may be, upon it a negotiable instrument, for any amount specified therein and not exceeding the amount covered by the stamp”.
Instrument may be incomplete as regards date, amount, drawer, payee, etc. The holder may fill in any of the particulars to make it a negotiable instrument. As long as the instrument is blank or incomplete, it is not a valid negotiable instrument. The liability of a person signing a blank instrument, therefore, arises only when the instrument is complete.

CRIMINAL PENALTIES IN THE CASE OF DISHONOUR OF A CHEQUE
(Section 138 – 142)

Whenever a cheque has been issued to discharge a legally enforceable debt or liability has been dishonoured due to paucity of fund, the drawee or holder in due course must within 30 days of receiving information of dishonour, give 15 days time to make the payment. He shall be liable, if he fails to do so. In which case, the payee or holder in due course can make a complaint within 1 month of cause of action. A court not lower than that of the Metropolitan Magistrate or Judicial Magistrate of First Class shall try the matter.

The trial shall be conducted expeditiously and endeavour shall be made to conclude the trial within 6 months from the date of filing of the complaint.

The punishment may be imprisonment upto 2 years or fine up to twice the mount of the cheque or both.

When Banker is justified in Dishonouring the Cheque?
1) Funds are not properly applicable to the payment of cheque for Eg. Funds are subject to lien, on banker is entitled to set-off.
2) Cheque is irregular or ambiguous Cheque.
3) Customer become insolvent.
4) Death, lunancy or insolveny of the customer and the banker has the notice of the same.
5) Post dated cheque is presented before its ostensible date.
6) Cheque presented beyond the period of six months from the date of issue.
7) If the drawer’s signature does not tally with his specimen signature.
8) If the banker is not holding, sufficient funds of the drawer unless the banker has agreed to honour the cheque without sufficient funds.
9) If the customer countermands payment and communicates the same to the bank properly.
10) Holder gives notice to the banker of loss of cheque.
11) If the cheque is not presented within the usual banking hours.
12) Where a garnishee order has been issued by the court attaching customer’s balance. (Garnishee is a person liable to pay to debt on behalf of the Judgment Debtor).


Holder in Due Course

The property in a negotiable instrument is acquired by anyone who takes it bonafide and for value inspite of any defect of the title in the person from whom he took it.

Such a person who takes an instrument in good faith and form value becomes the true owner of the instrument and is called a “holder in due course”.

[S-9] says “Holder in due course” means any person-

a) who for consideration became the possessor of a promissory note, bill of exchange OR cheque if payable to bearer, or
b) the payee or indorsee thereof, if payable to order,
c) before the amount mentioned in it became payable and
d) without having sufficient cause to believe any defect existed.
e) In the title of the person from whom he derived his title.

LAW - B.M.S. Sem - I

The Companies Act, 1956

I. Conversion of a private company into a public company and vice versa

(1) Conversion of a private company into a public company: There are two modes namely:
(i) By default: When a private company fails to comply with the essential requirements of a private company. However, the default must be intentional.
(ii) By special resolution: When the private company, by a special resolution may become a public company.
(iii) Becoming a subsidiary of a public company: A private company, which is a subsidiary of a public company, shall be deemed to be a public company.
(iv) By provisions of law: A private becomes a public company when:

(a) Not less than 25% of the paid-up capital is held by, one or more bodies corporate.
(b) Not less than 25% of the paid-up capital is held by a public company.
(c) Where the annual turn over is rupees 10 crores or more, during the relevant period (relevant period is the period of three consecutive financial years.).
(d) Where a private company accepts after an invitation is made by an advertisement or renews deposits, from the public other than its members.

(2) Conversion of a public company into a private company: A public company may convert itself to a private company by passing a special resolution to that effect and obtaining the approval of the Central Government.


II. Memorandum of Association

Meaning and Definition:

Just like a country is known by its constitution, a company is known by its Memorandum of Association. It is the framework within which a company performs. S. 2(28) of the Act defines Memorandum as,

“Memorandum means memorandum of association of a company originally formed or as altered from time to time in pursuance of any previous companies law or of this Act.”

Contents of Memorandum of Association:

(1) Name Clause: Every company must have a name of its own. The name gives the company a personal existence. The promoters, who select the name of the company, are required to take care that the name is not an undesirable one.
Further, in case of public company with limited liability must add the word ‘Limited’ at the end of its name, and the private company the word ‘Private Limited’ must be added at the end.
The department of Company Affairs, has held that if the company uses any of the following key words in the name, it must have minimum authorized capital as stated below:


Key words
Required authorized capital (Rupees)
i
Corporation
5 Crores
ii
International, Globe, Universal, Continental, Inter-Continental.
Asia, Asiatic (Being the first name)
1 Crore
iii
If any of the words mentioned in (ii) is used within the name (with or without brackets)
50 lakhs
iv
Hindustan, India, Bharat being the first word of the name
50 lakhs
v
If any of the words mentioned in (iv) is used within the name (with or without brackets)
5 lakhs
vi
Industries / Udyog
1 Crore
vii
Enterprises, Products, Business, Manufacturing
10 lakhs

(3) Registered Office Clause: Every company must have a registered office. At the time of registration, the memorandum must contain the name of the state, in which the registered office of the company shall be situated. The registrar shall be intimated within 30 days o incorporation. It is at the registered office where all registers and documents are kept. Also, the Annual General Meetings of the company are held.

(4) Objects Clause: This clause defines the objects of the company and indicates what a company can do. S. 13(1)(d) along with Table B, C, D and E requires the objets clause to be divided into (1) Main objects of the company to be pursued by the company on its incorporation (2) Objects incidental or ancilliary to the attainment of the main objects, and (3) Other objects of the company not included in (1) and (2). A company cannot go beyond the object clause without the approval of the shareholders and/or approval of the Central Government. It must however be noted objects cannot be illegal, immoral, opposed to public policy or the Act.

(5) Liability Clause: This clause states, the nature of liability o the members. In case of a company with limited liability, it must state that the liability of the members is limited whether it is y shares or by guarantee. In the absence of this clause in the memorandum means, that the liability of its members is unlimited.

(6) Capital Clause: This clause states, the share capital with which a company is registered and the number and value of the shares into which it is divided.

(7) Association Clause: This clause is also known as ‘subscription clause’. It is a declaration made by the subscribers who have signed the memorandum of their intention to form a company.


II. Object Clause and the Doctrine of Ultra Vires


Anything that a company does which is beyond the scope of the object clause is called ultra vires the object clause and is null and void. This doctrine was laid down in Ashbury Railway Carriages and Wagons Company v. Riche (1875) LR & HL 653. The company was incorporated with a number of objects. Two important objects being the company shall (a) make, sell, hire railway carriages and wagons, and (b) to act as mechanical engineers and general contractors. The directors of the company, contracted with Riche to finance the construction of railway line at Belgium.

Subsequently, the directors repudiated the contract, on the ground that it was ultra vires the company. Riche brought an action for damages for breach of contract.

The House of Lords held that the contract was ultra vires and therefore, null and void.


Effects of Ultra Vires Transactions: -

(1) Contract void: Ultra vires transactions render the contract void, giving no legal rights to the company or the outsiders. Such contracts can never be ratified.
(2) Property acquired under ultra vires transaction: If a company acquires property under an ultra vires transaction, the right of the company over the property shall be protected because assets so acquired represents corporate capital.
(3) Directors personally liable: Directors who part with the company’s money or property for ultra vires objects, will be personally liable to restore to the company the funds used for such purpose.
(4) Liability for torts: A company can be made liable for any tort, if the following two conditions are satisfied, viz.:
First, the activity, in the course of which the tort has been committed, falls within the scope of the Memorandum of Association.
Second, the servant of the company must have committed the tort within the course of his employment.


III. Articles of Association

Articles of Association are a document containing rules and regulations for the administration of the company.

Form and Signature of Articles: Table A in schedule I of the Companies Act, contains the ‘Regulation for management of a company’. A company may either accept Table A or make changes in the content of Table A for its articles.

Contents of Table A: The articles of a company usually deal with the following matters:

1) The business of the company.
2) The amount of the capital issued and the classes of shares into which the capital is divided; the increase and reduction of share capital;
3) The rights of each class of shareholders and the procedure for variation of their rights;
4) The execution or adoption of a preliminary agreement, if any;
5) The allotment of shares; calls and forfeiture of shares for non-payment of calls;
6) Transfer and transmission of shares;
7) Company’s lien on shares;
8) Extent of borrowing powers including issue of debentures;
9) General meetings, notices, quorum, proxy, poll, voting, resolution, minutes;
10) Number, appointment and powers of directors;
11) Dividends – interim and final – and general reserves;
12) Accounts and audit.
13) Keeping of books – both statutory and others.
14) Regulation as to seal.
15) Regulation as to winding up.



Distinction between Memorandum of Association and Articles of Association

The following are the fundamental points of distinction between Memorandum of Association and Articles of Association:

Criteria
Memorandum
Articles
Fundamental conditions or Internal regulations
The Memorandum contains the fundamental conditions upon which the company is incorporated. The conditions are introduced for the benefit of the creditors, the shareholders and the outside public.
The Articles of Association are the internal regulations of the company. They provide the manner, in which the company is to be carried and its proceedings disposed of.
Dominant or Subordinate
The Memorandum is a dominant instrument, as it states the purposes for which the company has come into existence.
The Articles are always held to be subordinate to Memorandum because they are mere internal regulations of the company.
Methods of alteration
Section 13 provides that some of the conditions of incorporation, contained in the memorandum, such as the objects clause, and the registered office clause, cannot be altered except by the special resolution of the company and with the sanction of the central government.
Section 31, on the other hand, provides that the Articles of Association can be altered simply by a special resolution. It does not requiore the sanction of the central government or of any other authority.
Effect of the acts done in contravention of MOA and AOA
If a company does something outside the scope of the objects stated in the Memorandum, it is absolutely null and void and incapable of ratification.
If a company does something in contravention of the provisions of its Articles, it is only an irregularity and can always be confirmed by the shareholders. And thus rectified.


IV. Doctrine of Constructive Notice

The memorandum and articles of association of a company are public documents. Any person who is dealing with a company, presumed to have read and understood the proper meaning of the documents. In other words, no party can take the plea that he was ignorant of what have been stated in the memorandum and articles of association.
The doctrine of constructive notice comes to the aid of a company vis-à-vis the outsiders.

V. Doctrine of Indoor Management

As one is aware that the doctrine of constructive notice protects the company in its dealings with outsiders, the doctrine of indoor management comes to the aid of the outsiders, while dealing with the company.
The doctrine of indoor management implies, anyone dealing with the company who has no means of knowing about the internal functioning of the company has every right to presume that, things are happening the way it ought to happen. And any irregularity will not affect the rights of the outsiders. The company will not be allowed to escape liability.

In Royal British Bank v. Turquand (1856) 6E and B 327, the articles authorised the directors to borrow on bonds, by a resolution passed at the general meeting of the company. A bond was issued against the borrowings made by the company without passing the required resolution. Held, the company was liable on the bond as the borrower could presume that the resolution had been passed before making the borrowing through the issue of bond. This came to be known as ‘Turquand Rule’.

Exceptions to the Rule of Indoor Management:

The doctrine of indoor management is subject to five exceptions:

(1) Knowledge of internal irregularities of the company: A person already aware of the irregularity cannot claim protection under this rule.
(2) Suspicion of the internal irregularity: Where a person dealing with the company is placed in such circumstances, which are suspicious in nature and which invite inquiry, he is not protected by the doctrine.
(3) Acts void abinitio: This doctrine does not apply to acts that are void abinitio. Example: Where the document is a forged one.
(4) Acts, outside the apparent authority of the company: Where the acts of an officer, do not fall within the apparent authority of such an officer, protection under the doctrine cannot be claimed.
(5) No knowledge of articles: A person who at the time of entering into a contract with a company, has no knowledge of the company’s articles of association, cannot be saved or protected by the doctrine.



VI. Prospectus

Definition and meaning:

S. 2(36) defines a prospectus as –

“Any document desired or issued as prospectus and includes any notice, circular, advertisement or other document inviting deposits from the public or inviting offers from the public for the subscription or purchase of shares in or debentures of a body corporate.”


Contents of a Prospectus:
Section 56 lays down that the matters and reports stated in Schedule II to the Act must be included in a prospectus. The format of a prospectus is divided into three parts.
Part I:
(1) General information: Under this head information is given about
(i) Name and address of registered office of the company.
(ii) Name/s of stock exchange/s where application for listing is made.
(iii) Declaration about refund of the issue if minimum subscription of 90 per cent is not received within 90 days from closure of the issue.
(iv) Declaration about the issue of allotment letters / refunds within a period of 10 weeks and interest in case of any delay in refund, at the prescribed rate, under s. 73.
(v) Date of opening of the issue.
(vi) Date of closing of the issue.
(vii) Name and address of auditors and lead managers.
(viii) Whether rating from CRISIL or any rating agency has been obtained for the proposed debentures / preference shares issue. If no rating has been obtained, this should be answered as ‘NO’.
(ix) Name and address of the underwriters and the amount underwritten by them.

(2) Capital structure of the company:
(i) Authorised, issued, subscribed and paid-up capital.
(ii) Size of the present issue, giving separately reservation for preferential allotment to promoters and others.

(3) Terms of the present issue:
(i) Terms of payment.
(ii) How to apply.
(iii) Any special tax benefits.


(4) Particulars of the issue:
(i) Objects.
(ii) Project cost.
(iii) Means of financing (including contribution of promoters).

(5) Company management and project:
(i) History and main objects and present business of the company.
(ii) Promoters and their background.
(iii) Location of the project.
(iv) Collaborations, if any.
(v) Nature of the product(s). export possibilities.
(vi) Future prospectus.
(vii) Stock market data for share / debentures of the company including high and low price in each of the last three years and monthly high and low during the last six months, if applicable.

(6) Certain prescribed particulars: in regard to the company and other listed companies under the same management, which made any capital issue during the last three years.
(7) Outstanding litigations: relating to financial matters or criminal proceedings against the company or directors under Schedule XIII.
(8) Management perception of risk factors: (e.g., sensitivity to foreign exchange rate fluctuations, difficulty in availability of raw materials or in marketing of products, cost / time over-run, etc.)


VII. Meetings

The following are the kinds of meetings of shareholders, Board of Directors and Class.

Kinds of Meetings:

(1) Statutory Meeting: This meeting is to be held by every public company limited by shares or limited by guarantee and having a share capital. It is convened after one month and not later than six months of commencement of business. The Directors are required to give minimum twenty-one days notice to the members. Along with the notice, a statutory report must be sent to all the members.
The statutory report contains the following matters:
(a) Total shares allotted.
(b) Cash received.
(c) Summary of receipts and payments made up to 7 days prior to the report.
(d) Names, addresses and occupations of the directors, manager and secretary of the company and of its auditors.
(e) Particulars of contracts if any.
(f) Extent of non-carrying of each underwriting contract, together with the reason.
(g) Details of commission and brokerage paid or to be paid to the director or manager, in connection with the issue of sale of shares or debentures.
(h) Details of arrears due from every director and manager.

If any default is made in filling the statutory report or in holding the statutory meeting, those in default are liable to fine, which may extend to five thousand rupees.

Another consequences being the Tribunal can order for compulsory winding up of the company.


(2) Annual General Meeting (AGM): Every company is required to hold the annual general meeting, in addition to any other meeting held by the company. The first general meeting is required to be held within a period of not more than 18 months from the date of its incorporation.

The provisions relating to this meeting may be summarized as follows:

(a) AGM must be held once a year. The gap between two consecutive AGMs cannot be more than 15 months. However, the Registrar of companies may extend the time for holding the AGM by not more than 3 months.
(b) At least 21 days notice of the meeting must be given to every member of the company. The notice must specify the date, place and time of the meeting.
(c) Shorter days of notice may be given with the consent of all members entitled to vote at the meeting. The meeting must be held on a day, which is not a public holiday and during the business hours.
(d) The meeting must be held at the registered office or the company or at some place within the city, town or village in which the registered office is situated.
(e) The business to be transacted at such a meeting may comprise of:

i. Consideration of accounts, balance sheet and the reports of the Board of directors and auditors.
ii. Declaration of dividend
iii. Appointment of directors.
iv. Appointment of directors.
v. Any other business.

(f) Where the meeting is not held in accordance with the law, the company and every officer of the company who is in default shall be punishable with fine which may extend to Rs. 50,000 and in case of continuing default with further fine which may extend to Rs. 2,500 per day during the continuance of default. Further the Central Government has the power to call for the AGM.

(3) Extraordinary or special General meeting: Any meeting held between two annual general meetings is called extraordinary general meeting. It is called to transact some urgent or special business, which cannot be postponed till the next annual general meeting.
(4) Board meeting: The meeting of the Board of Directors is referred to as Board Meeting. The Act requires board meeting to be held at least once in 3 months. The meeting may be held at any convenient place and time with a proper notice. Failure to give proper notice can hold the guilty person liable to a fine of Rs. 1000. Quorum for the board meeting is 1/3rd the strength of the Directors or 2 Directors whichever4 is higher. Quorum is necessary at every stage of the meeting.
(5) Class meeting: It is a meeting of a particular class of shareholders. It is generally held to pass resolution, which will bind only the members of the class concerned. These class meetings must be convened, whenever it is necessary to alter or change the rights or privileges of that class as provided by the articles.
Example: Debenture holder, Creditors & Preference Share holders.

VIII. Directors


A] Definition : S. 2(13) defines –

“Director includes any person occupying the position of director, by whatever name it called.”


B] Legal position of director:

i) Director as agent: Director is primarily recognized as an agent of the company. Director’s role is akin to the agent in the following aspects:

a) Acts of the director acts of the company: The director is the agent, while the company is the principal. The company is liable for the director’s act.

b) Notice to a director is notice to the company: Just as notice given to the agent is notice to the principal, any notice given to the director will be taken to be given to the company.

c) Ratification: Like a principal who may ratify the act of an agent, company can also ratify acts of a director provided it is not ultravires.

ii) Director as trustee: Though a director is not trustee in the strict sense of the term yet he has been held to be so since he stands in a fiduciary relation towards the shareholder.

iii) Director a managing partner: Directors while holding the interest of the company, are authorised by the shareholders to manage and control the affairs of the company in which shareholders are considered as inactive partners.

iv) Director as an employee: Although a director may be compared to an employee as he gets paid for the work done, he is not an employee.

v) Director as an organ of the body: A director is many a time compared to the brain, because the company operates through the director.

C] Duties and Liabilities of Directors:

i) Duty to act in good faith: Directors are in a fiduciary relation to the company. Therefore, they must discharge their duties with greatest good faith.
ii) Duty to act with reasonable care and diligence.
iii) Duty to attend board meetings and committee meetings.
iv) Duty not to delegate functions.
v) Duty to invest company’s money in a proper state of investements.
vi) Duty to deposit money of the company in a scheduled bank.
vii) Duty to forward statutory report to every member.
viii) Duty to call for extra-ordinary meeting, when validly demanded.
ix) Duty to prepare and place the balance sheet at the AGM
x) Duty to refrain from acting on behalf of the company, in the case of liquidation.

Liabilities:

i) Liability of directors as shareholders: Directors are also shareholders of the company. Hence like the shareholder their liabilities may be limited, unlimited or limited by guarantee based on the nature of the company.
ii) Person liabilities of directors: Personal liabilities of directors occurs in the following circumstances:
a) For breach of trust.
b) For untrue statement in the prospectus, failure to allot shares within
Stipulated time.
c) For ultravires acts of the company.
d) For misapplication of company’s money.
e) For fraud and torts of the company directed by the directors.
f) For loss on account of failure to exercise skill and diligence.

iii) Criminal liability: The companies Act imposes criminal liability upon directors, for certain breath of their duties like making untrue statement in the prospectus, falsification of accounts etc.

Statutory Compliance

Compliance Information

1) Statutory Provisions work: Regarding assignment of Provident Fund, ESI, PT, Gratuity & all other statutory provisions work on retainer ship basis

2) HR & Administration Services: According to Factories Act, 1948 & Company Policy.

3) Placement: If your organization needs some highly talented candidates especially for HR administration and also semi - skilled, skilled and unskilled labour we will provide the right person at the right time for the right job.

4) Legal Services: Industrial Relations, Employees cases, Arbitration, Enquiries & legal Advisor.

SCOPE OF WORK

We are pleased to introduce ourselves as one of specialized consultants in Provident Fund and ESI matters. Company will preparing, reviewing, submitting necessary documents and appearing on behalf of V-SAP before the Judicial / quasi Judicial / other authorities for any matter pertaining to the following statuettes and any additional statuettes that become applicable to the Company.


Shops & Establishments Act and other Labour Acts ·

Registration under Shops & Establishment Act·
Maintaining Statutory Registers under various Labour Act·
Display of Notices and Abstracts


Contract Labour (R & A) Act 1970 & Central Rules 1971 ·

Registration under CLRA Act·
Maintaining Register prescribed for Principle Employer·
Guide the Contractors in obtaining license under CLRA Act·
Notice of Commencement / Completion in Form ? VIB·
Auditing the Records / Registers of Contractors to ensure compliance·
Display of Notices and Abstract prescribed under CLRA Act


Labour Welfare Fund Act ·

Remittance of LWF·
Maintaining registers and submissions of returns.

Payment of Gratuity Act ·

Registration and Notice of opening in Form A for all locations·
Display of Notices and Abstracts

Maternity Benefit Act ·

Maintaining Register in Form ?A·
Display of Abstracts

Equal Remuneration Act ·

Maintaining Register in Form ?D

Payment of Wages Act 1936 ·

Maintaining Register in Form I, Form II & Form III·
Display of Notice / Abstract

Minimum Wages Act 1948 ·

Maintaining Registers in Form I, Form II & Form IV·
Display of Notice / Abstract

Employment Exchange Compulsory Notification Act ·

Submitting Occupational Returns once in Two Years·
Submitting Quarterly Returns To the Local Employment Exchange


Provident Fund ? Annually .

· Submitting Form 6A to the PF Authorities.·
· Submitting Form 3A to the PF Authorities·
· Receiving employee-wise statement from the PF Authorities

Provident Fund ? Monthly Activities ·

· Streamlining all nominations & declaration forms for all existing employees of the company.·
· Ensuring all employees has PF numbers·
· Ensuring monthly deduction of PF from the payroll·
· Remitting employee & employer?s contribution to the authorities.·
· Submitting Forms ? 12A monthly, with the triplicate copy of the challan to the PF authorities.·
· Following up with PF claims / Transfer cases of PF in Pf Office.·
· Coordination with PF Inspector at the time of Inspection.

ESIC ? Monthly
·
· Streamlining all declaration forms for all existing employees of the company.·
· Ensuring all employees have ESIC numbers / Temporary Cards·
· Ensuring conversion of temp cards to Permanent Cards.·
· Ensuring monthly deduction of ESI from the payroll·
· Remitting Employer & Employee contributions to ESIC.·
· Submitting Half yearly returns with copy of challans·
· Maintaining Register in form 7·
· Coordination with the ESI Inspector at the time of Inspection.


Professional Tax ·

· Registration under PT·
· Obtaining PT Registration Certificate & Enrolment Certificate·
· PT Remittances & submission of Returns.


Work Related HR & Administration

Time keeping
Leave Administration
Salary Processing
Benefits & Compensation
Personnel & Administration.







LABOUR LAWS

i. The Payment of Wages Act, 1936 and the Rules made
ii. The Minimum Wages Act, 1948 and the Rules made
iii. The Contractor Labour [Regulation & Abolition] Act, 1970 and the Rules made
iv. The Maternity Benefit Act, 1961 and the Rules made
v. Payment of Bonus Act, 1965 and the Rules made
vi. Payment of Gratuity Act, 1972 and the Rules made
vii. Equal Remuneration Act, 1976 and the Rules made
viii. Maharashtra Workmen's Minimum House Rent Allowance
Act, 1986,
ix. The Factories Act, 1948,
x. The Bombay Shops and Establishments Act, 1948,
xi. Inter State Migrant Workmen [Regulation of Employment and Conditions of Service] Act, 1979 and Rules, 1980,
xii. Industrial Employment (Standing Orders) Act. 1948,
xiii. Workmen's Compensation Act, 1923.

Legal Heir Certificate

Legal Heirship Certificate (Mumbai)

Introduction: This certificate is issued for a limited purpose of receiving Government dues such as Govt. Provident Fund, Gratuity etc. to the legal heir of the deceased employee of the State and Central Govt.

A) Under what Act/Rules/Govt. orders, the certificate is issued : Maharashtra Treasury Rules, 1968, Rule 359

B) Which office to contact :Concerned Window , Mumbai City Collectorate , Old Custom House, ground floor, Fort Mumbai-01

C) How to make an application :
The application should be made in the prescribed form.
Affix Court Fee Stamp of Rs.2/- on the application

D) What documents to attach along with the application :
Xerox copy of the first & last page of the ration card
Affidavit duly affirmed on stamp paper of Rs.20/-
Death certificate Service Record from the office of the deceased employee

E) Where to submit the application :Concerned Window, Mumbai City Collectorate , Old Custom House,Ground floor, Fort Mumbai-01

F) Time limit within which the certificate will be delivered : 15 Days.

G) Complaint redressal authority : Tehsildar

Steps for Registering your Heirship

In case somebody died intestate (without a will) and you are a single or joint heir to such deceased person, you should take the following steps {and it takes the approximate time as mentioned in the brackets} to have your name/s entered into the property records in place of the deceased person.
1.Heirship Certificate

a)Bring Death Certificate from Municipality & Church / Mosque (In-charge of the burial ground).{1-2 Days}

b)Apply to local Talathi / Patwari (Revenue Clerk at the village level) for Heirship Certificate.{1 Day}

c)Prepare affidavit in Mamletdar / Tehsildar Office. {1 Day}

d)File the affidavit before Talathi / Patwari (Village Revenue Clerk). {1 day}

e)Obtain Heirship Certificate from Talathi / Patwari. {1-2 Days}

f)Apply to Mamletdar / Tehsildar for heirship certificate with the certificate from Talathi / Patwari and affidavit. {1 Day}

g)Obtain heirship certificate from Mamletdar / Tehsildar office. {2-3 Days}

2.Entering the names of the heirs in the Municipal records.

a)Obtain Assessment List for the property from the concerned ward office of the Municipal Corporation / Council. {1-2 Days}

b)Apply to the same office with the Heirship Certificate and the copy of Assessment List. {1 Day} and


i]Satisfy the concerned staff to change the names in the municipal records by entering the names of the heirs in place of the deceased owner. {1-2 Days}

OR

ii]Move the civil court for obtaining a Succession Certificate. {2-4 months}

c)After obtaining [i] the official's consent or [ii] Succession certificate from court, have the names of the heirs entered in the municipal records and obtain a fresh copy of the same record. {2-5 Days}

3.Entering the names of the heirs in the Talathi / Patwari (Village Revenue Clerk) records.

a)Obtain Records of Rights Extract also commonly known as 7/12 extract or Khasra-Khatauni for the property from the concerned Village Revenue Clerk commonly known as Talathi or Patwari of your village where the property is located. {0-2 Days}

b)Apply to the same office with the Heirship Certificate and the copy of Records of rights. {1 Day}

c)After the names of the heirs have been entered in the records and the entries certified obtain a fresh copy of the same record. {0-2 Days}

Note : Talathis and Circle officers are known to take their own time to enter the facts into records as well as to certify the same. Mostly personal visit with some coaxing helps in expediting the work here.


Steps for obtaining Succession Certificate

In case you have to obtain a Succession Certificate for succeeding a near and dear departed relative, who has died without executing any "Will", of whom you are a heir, you have to do the following

1.Where the Application has to be made ?

The Application is to be made in the court, where the properties of your deceased relative are situated or where he / she normally resided. Depending on the value of the estate of the deceased, the matter shall go to the type of court, which can conduct cases for that value [This is known as "pecuniary jurisdiction" of the court]

2.What is the procedure of the court ?

You have to apply to the court with the names of all other heirs of your late relative as the respondents in the matter. Normally a newspaper notice is also issued apart from mandatory notice to the respondents. Upon the expiry of the time period (normally 1 and a half months) from the date of publication of the notice after the respondents have given their no objection, the court passes the orders for issuance of the Succession Certificate in your name, for which you have to then submit Judicial Stamp papers of sufficient amount (as per the prescribed court fees structure) in the court, whereafter the Certificate is typed by the court staff, duly signed and sealed and delivered.

3.How long should it take to obtain the Succession certificate from the court ?

We believe it should roughly take about 3-4 months from date of filing to receive your certificate.

APPLICATION FOR LEGAL HEIR CERTIFICATE
To
The Mandal Revenue Officer
------------------------------------
------------------District.
Respected Sir,
Sub:- Issue of Legal Heir certificate- regarding.
I R/o ------------H.No.------------------------------------------------------------------------I am Legal Heir of deceased person who is expired on ---------------------------------------- the following family members are legal heirs of Shri Late:----------------------------------------------------------------------------------------------------.
Sl.No. Name Relationship with Age
Deceased person
- -- ------------------------ ------------------------------- --------------------- ------------------- -----
-------------------------------- ------------------------------- ---------------------------------- --------
I request your kind authorities to issue us legal heir certificate at an early date.
Thanking you,
Yours faithfully,
( )
Encl: Affidavit
2.Death Certificate
3.Service certificate
of deceased if He/she were an employee.

AFFIDAVIT
I ……………………………..S/o Sri ………………………………………. Aged about ………………………years, having an occupation of …………………………, resident of ………………………………do hereby solemnly affirm and state on oath as follows:
I am the deponent herein, as such I am well acquainted with the facts of this affidavit.
I submit that my …………………..(relationship to be mentioned) namely ………………………………………..(givename of the deceased) who was working ………………………….. (give details of occupation of the deceased) has expired on ……………………..(date) leaving behind surviving legal heirs as under:
Sl. No. Names Age Relationship with the deceased Status (married/unarried)
1
2
3
4
5
I further submit that the above mentioned are legal heirs only.
Hence, I swear this affidavit in order to obtain legal heir certificate from the concerned Mandal Revenue Officer for the service benefits of my ………………….(give relation ship with the deceased).
The above facts are true and correct to the best of my knowledge and belief. Hence this affidavit.
DEPONENT
Sworn and signed before me on this
………..day of ……..month ………
year at ………..place.
NOTARY


A FIX COURT FEE STAMP OF RS.2/-
To

The Mandal Revenue Officer.........................................Mandal____________________District, A.P.
Sub: Application for Issue of Legal Heirs Certificate/ Family Members Certificate - Requested - Regarding.
Respected Sir,

I beg to submit that my.................................................................................................R/o.H.No.....................................................................................................................................................................................expired on...............................................................He/She as a pentioner.....................................................................He, She was expired while in service working as a ...................................................................................................in the office of the....................................................................................................................................................................I have applied for legal Heirship certificate to submit the same at......................................................for getting to claim thebenefit for claiming Department inner benefits. life time arrears appointment of my .......................................................Smt./Sri./Kum..................................................... to you for verification, I may kindly be issued a Residential Certificate. On receipt of the Certificate from Mandal Oficer, I will submit the same......................................................................for the purpose of.....................................................................................................................
Name of the Family members are given below:
Sl.No.
Name of the family members
AgeYears
Relationship withthe deceased
Remarks/Status
1.




2.




3.




4.




5.




6.




7.





I therefore humbly request your good self to issue the in Legal Heir ship Certificate/Family member Certificate and submitted death certificate No...............................dated...........................................and pension payment slip/servicecertificate of his/her deceased of submitted herewith for kind per ................ and necessary action.


Dated:
Yours Faithfully
Name:
( )
Address: