Non-Obstante Clause In S. 109A(3) Of Companies Act 1956 Doesn't Exclude Legal Heir From Claiming Securities Against Nominee: Supreme Court

The Supreme Court has held that the non-obstante clause in both Section 109A(3) of the Companies Act, 1956 & Bye-law 9.11.7 of the Depositories Act, 1996, does not exclude the legal heirs from their rightful claim over the securities, against the nominee.The sole purpose of the non-obstante clause is to allow the company to vest shares upon the nominee to the exclusion of any other person, for the purpose of discharge of its liability against diverse claims by the legal heirs of the deceased...

Nomination Process Under Companies Act Does Not Override Succession Laws: Supreme Court

The Supreme Court has held that the nomination process under the Companies Act, 1956 (pari materia Companies Act, 2013) does not override succession laws. It is beyond the scope of the company's affairs to facilitate succession planning of the shareholder. In case of a Will, it is upon the administrator or executor under the Indian Succession Act, 1925, or in case of intestate succession, the laws of succession to determine the line of succession.The Bench has upheld the High Court order,...

S.274 Companies Act | NCLT Can Only Direct Company & Not It's Shareholders To File Written Statement & Objections During Winding Up: Kerala HC

The Kerala High Court recently laid down that the National Company Law Tribunal (NCLT) can only direct the Company to file its objections along with the statement of affairs when a petition for winding up of the Company before the Tribunal had been filed by any person other than the Company itself. Justice C. Jayachandran, passed the order on perusing Section 274(1) of the Companies Act, which stipulates the 'directions for filing statement of affairs'. The NCLT, Kochi Bench had in...

Companies Act | NCLT Permits 'Change' In Utilization Of Share Capital Reduction Amount By Invoking Powers Under Rule 11 Of NCLT Rules

The National Company Law Tribunal (NCLT), Chennai Bench, comprising of Shri Sanjiv Jain (Judicial Member) and Shri Ravichandran Ramasamy (Technical Member), while invoking its powers under Rule 11 of the NCLT Rules, 2016 has permitted a company to 'change' the utilization of its reduced share capital amount by altering the amounts to be adjusted towards Negative Capital Reserves and the amounts returnable to Shareholders. Previously, the NCLT had permitted the Company to reduce its...

S.469 CrPC | Date Of Knowledge Of Offence Decides Limitation Period, Issuance Of Notice By ROC To Accused Company Indicates Knowledge: Telangana HC

The Telangana High Court has held that as per Section 469 of CrPC, issuance of notice by the Registrar of Companies indicates knowledge of the offence committed by the accused company and that this determines the limitation period.Justice K. Surender clarified that the date of issuance of sanction by the Central Government for initiating a complaint cannot be taken as the date of knowledge.“In view of Section 469 of Cr.P.C, the commencement of the period of limitation would be from the date of...

NCLT Mumbai: Tribunal Is A Judicial Authority With Power To Refer Matter To Arbitration If Dispute Falls Within Scope Of Arbitration Agreement

The National Company Law Tribunal (“NCLT”), Mumbai Bench, comprising of Mr. Kishore Vemulapalli (Judicial Member) and Mr. Prabhat Kumar (Technical Member), dismissed an application and held that the Tribunal is a judicial authority, and has the power to refer the matter to Arbitration if it finds that the dispute is arbitral and falls within the scope of the Arbitration Agreement. Background Facts: Chaitra Gowdar Chidanand (Petitioner) had filed a Company Petition before NCLT,...

Corporate Ministry Can Order Company To Change Name After 12 Months If Deceptively Similar To Another Priorly Registered Company: Telangana HC

The Telangana High Court has upheld that the Regional Director, Ministry of Corporate Affairs is authorised to direct a company for change of name, even after expiry of 12 months, if it has reason to believe that the company incorporated at a later date is trying to pass off as a Company incorporated on a prior date.Justice K Lakshman has conceded with the view taken by the Delhi High Court in Mondelez Foods Private Limited v. The Regional Director (North), Ministry of Corporate Affairs passed...

Customs Act Does Not Create A Statutory First Charge Overriding Charge In Favour Of Secured Creditor Under S. 529A Of Companies Act : Supreme Court

The Supreme Court has ruled that in case of winding up of a company, the customs duty owed by the company would be treated as a preferential payment under Section 530(1) (a) of the Companies Act, 1956. But customs duty would not override and be given preference over the payments due to overriding preferential creditors covered under Section 529A of the Companies Act, which include the secured creditors, the court has held.The court said that the Customs Act, 1962 does not create a statutory...

Guidelines On First Loss Default Guarantee: Brief Summary And Takeaways

Preface and regulatory developmentsWith increased penetration of internet and technological innovation, there has been a surge of FinTech players. Especially in digital lending space, there has been an increased reliance placed by the regulated entities (i.e., the banks and non-bank financial companies who are permitted to carry out lending business) (“RE”) upon third party lending service providers (“LSPs”). The LSPs (mostly unregulated) are essentially technology-centric entities which have...

Economic Offences Are Serious But Severity Of Allegations Cannot Be Justification For Pre-Trial Incarceration: Delhi High Court

Observing that severity of allegations cannot be a justification for pre-trial incarceration, the Delhi High Court has granted bail to a Director of M/s Parul Polymers Pvt Ltd. in a case under Section 447 of the Companies Act, 2013.Justice Anup Jairam Bhambhani said, “Needless to add, that nothing in this judgment should be taken to detract from the position that economic offences are serious in nature, and the allegations against the petitioner and other co-accused, if proved at the trial, must...

MCA Approves Withdrawal Of 7,338 Prosecutions Pending In Courts Under Companies Act

The Ministry of Corporate Affairs (“MCA”), Government of India has issued a Press Release dated 14.07.2023, notifying that it has approved withdrawal of another 7,338 prosecutions pending before courts under Special Arrears Clearance Drive-II, in order to promote Ease of Doing Business and decriminalize compoundable offences under Companies Act, 2013. Withdrawal will lead to 21.86% reduction in pending prosecutions being pursued by Central Government. However, prosecutions related to...

Using Fairness Opinions By IFAs To Improve India’s RPT Framework

Related Party Transactions [‘RPT’] refers to dealings between parties with an existing relationship or a common motive. Due to concerns with conflicts of interest and abuse of power in such transactions, the Securities and Exchange Board of India [‘SEBI’] has put in place measures in the Companies Act as well as the SEBI Listing Obligations and Disclosure Requirement [‘LODR’] Rules to prevent misuse of the power that the agents possess. However, the same have fallen short in the past....