Company Law Amendment applicable for CA Final May 2017

Company Law Amendment applicable for CA Final May 2017

CA FINAL LAW AMENDMENT NOTES FOR MAY 17 EXAM

Complied By CA. Aseem Trivedi

CA FINAL

COMPANY LAW

AMENDMENT NOTES

APPLICABLE FOR MAY 2017 EXAM

WITH

CA. ASEEM TRIVEDI

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AMENDMENT 1 124. Unpaid Dividend Account. (W.e.f 07.09.2016) 1. Where a dividend has been declared by a company but has not been paid orclaimed within thirty days from the date of the declaration to any shareholderentitled to the payment of the dividend, the company shall, within seven daysfrom the date of expiry of the said period of thirty days, transfer the total amountof dividend which remains unpaid or unclaimed to a special account to beopened by the company in that behalf in any scheduled bank to called theUnpaid Dividend Account. 2. The company shall, within a period of ninety days of making any transfer of anamount under sub-section (1) to the Unpaid Dividend Account, prepare astatement containing the names, their last known addresses and the unpaiddividend to be paid to each person and place it on the website of the company, ifany, and also on any other website approved by the Central Government for thispurpose, in such form, manner and other particulars as may be prescribed. 3. If any default is made in transferring the total amount referred to in sub-section(1) or any part thereof to the Unpaid Dividend Account of the company, it shallpay, from the date of such default, interest on so much of the amount as has notbeen transferred to the said account, at the rate of twelve per cent. per annumand the interest accruing on such amount shall enure to the benefit of themembers of the company in proportion to the amount remaining unpaid tothem. 4. Any person claiming to be entitled to any money transferred under sub-section(1) to the Unpaid Dividend Account of the company may apply to the companyfor payment of the money claimed. 5. Any money transferred to the Unpaid Dividend Account of a company inpursuance of this section which remains unpaid or unclaimed for a period ofseven years from the date of such transfer shall be transferred by the companyalong with interest accrued, if any, thereon to the Fund established under sub-section (1) of section 125 and the company shall send a statement in theprescribed form of the details of such transfer to the authority which administersthe said Fund and that authority shall issue a receipt to the company as evidenceof such transfer. 6. All shares in respect of which dividend has not been paid or claimed for sevenconsecutive years or more shall also be transferred by the company in the name of Investor Education and Protection Fund along with a statement containingsuch details as may be prescribed: Provided that any claimant of shares transferred above shall be entitled to claim thetransfer of shares from Investor Education and Protection Fund in accordance with suchprocedure and on submission of such documents as may be prescribed. 7. If a company fails to comply with any of the requirements of this section, thecompany shall be punishable with fine which shall not be less than five lakhrupees but which may extend to twenty-five lakh rupees and every officer of thecompany who is in default shall be punishable with fine which shall not be lessthan one lakh rupees but which may extend to five lakh rupees. AMENDMENT 2 125. Investor Education and Protection Fund. (W.e.f 07.09.2016) 1. The Central Government shall establish a Fund to be called the InvestorEducation and Protection Fund (herein referred to as the Fund). 2. There shall be credited to the Fund

a. the amount given by the Central Government by way of grants after dueappropriation made by Parliament by law in this behalf for being utilised forthe purposes of the Fund;

b. donations given to the Fund by the Central Government, State Governments,companies or any other institution for the purposes of the Fund;

c. the amount in the Unpaid Dividend Account of companies transferred to theFund under sub-section (5) of section 124;

d. the amount in the general revenue account of the Central Government whichhad been transferred to that account under sub-section (5) of section 205A ofthe Companies Act, 1956, as it stood immediately before the commencementof the Companies (Amendment) Act, 1999, and remaining unpaid orunclaimed on the commencement of this Act;

e. the amount lying in the Investor Education and Protection Fund undersection 205C of the Companies Act, 1956;

f. the interest or other income received out of investments made from theFund;

g. the amount received under sub-section (4) of section 38;

h. the application money received by companies for allotment of any securitiesand due for refund;

i. matured deposits with companies other than banking companies;

j. matured debentures with companies;

k. interest accrued on the amounts referred to in clauses (h) to (j);

l. sale proceeds of fractional shares arising out of issuance of bonus shares,merger and amalgamation for seven or more years;

m. redemption amount of preference shares remaining unpaid or unclaimed forseven or more years; and

n. such other amount as may be prescribed:

Provided that no such amount referred to in clauses (h) to (j) shall form part of the Fundunless such amount has remained unclaimed and unpaid for a period of seven yearsfrom the date it became due for payment.

3. The Fund shall be utilised for

a. the refund in respect of unclaimed dividends, matured deposits, matureddebentures, the application money due for refund and interest thereon;

b. promotion of investors education, awareness and protection;

c. distribution of any disgorged amount among eligible and identifiableapplicants for shares or debentures, shareholders, debenture-holders ordepositors who have suffered losses due to wrong actions by any person, inaccordance with the orders made by the Court which had ordereddisgorgement;

d. reimbursement of legal expenses incurred in pursuing class action suitsunder sections 37 and 245 by members, debenture-holders or depositors asmay be sanctioned by the Tribunal; and

e. any other purpose incidental thereto, in accordance with such rules as maybe prescribed:

Provided that the person whose amounts referred to in clauses (a) to (d) of sub-section (2) of section 205C transferred to Investor Education and Protection Fund, after theexpiry of the period of seven years as per provisions of the Companies Act, 1956, shall be entitled to get refund out of the Fund in respect of such claims in accordance withrules made under this section. Explanation.The disgorged amount refers to the amount received throughdisgorgement or disposal of securities.

4. Any person claiming to be entitled to the amount referred in sub-section (2)may apply to the authority constituted under sub-section (5) for the payment ofthe money claimed.

5. The Central Government shall constitute, by notification, an authority foradministration of the Fund consisting of a chairperson and such other members,not exceeding seven and a chief executive officer, as the Central Governmentmay appoint.

6. The manner of administration of the Fund, appointment of chairperson,members and chief executive officer, holding of meetings of the authority shallbe in accordance with such rules as may be prescribed.

7. The Central Government may provide to the authority such offices, officers,employees and other resources in accordance with such rules as may beprescribed.

8. The authority shall administer the Fund and maintain separate accounts andother relevant records in relation to the Fund in such form as may be prescribedafter consultation with the Comptroller and Auditor-General of India.

9. It shall be competent for the authority constituted under sub-section (5) tospend money out of the Fund for carrying out the objects specified in sub-section(3).

10. The accounts of the Fund shall be audited by the Comptroller and Auditor-General of India at such intervals as may be specified by him and such auditedaccounts together with the audit report thereon shall be forwarded annually bythe authority to the Central Government.

11. The authority shall prepare in such form and at such time for each financial yearas may be prescribed its annual report giving a full account of its activitiesduring the financial year and forward a copy thereof to the Central Governmentand the Central Government shall cause the annual report and the audit reportgiven by the Comptroller and Auditor-General of India to be laid before eachHouse of Parliament.

AMENDMENT 3 130. Re-opening of accounts on courts or Tribunals orders. (W.e.f 01.06.2016) 1. A company shall not re-open its books of account and not recast its financialstatements, unless an application in this regard is made by the CentralGovernment, the Income-tax authorities, the Securities and Exchange Board, anyother statutory regulatory body or authority or any person concerned and anorder is made by a court of competent jurisdiction or the Tribunal to the effectthat

i. the relevant earlier accounts were prepared in a fraudulent manner; or

ii. the affairs of the company were mismanaged during the relevant period,casting a doubt on the reliability of financial statements:

Provided that the court or the Tribunal, as the case may be, shall give notice to theCentral Government, the Income-tax authorities, the Securities and Exchange Board orany other statutory regulatory body or authority concerned and shall take intoconsideration the representations, if any, made by that Government or the authorities,Securities and Exchange Board or the body or authority concerned before passing anyorder under this section. 2. Without prejudice to the provisions contained in this Act the accounts sorevised or re-cast under sub-section (1) shall be final. AMENDMENT 4 131. Voluntary revision of financial statements or Boards report. (W.e.f 01.06.2016) 1. If it appears to the directors of a company that

a. the financial statement of the company; or

b. the report of the Board, do not comply with the provisions of section 129 orsection 134 they may prepare revised financial statement or a revised reportin respect of any of the three preceding financial years after obtainingapproval of the Tribunal on an application made by the company in suchform and manner as may be prescribed and a copy of the order passed by theTribunal shall be filed with the Registrar:

Provided that the Tribunal shall give notice to the Central Government and the Incometax authorities and shall take into consideration the representations, if any, made bythat Government or the authorities before passing any order under this section: Provided further that such revised financial statement or report shall not be prepared orfiled more than once in a financial year: Provided also that the detailed reasons for revision of such financial statement or reportshall also be disclosed in the Board's report in the relevant financial year in which suchrevision is being made. 2. Where copies of the previous financial statement or report have been sent out tomembers or delivered to the Registrar or laid before the company in generalmeeting, the revisions must be confined to

a. the correction in respect of which the previous financial statement or reportdo not comply with the provisions of section 129 or section 134; and

b. the making of any necessary consequential alternation.

3. The Central Government may make rules as to the application of the provisionsof this Act in relation to revised financial statement or a revised director's reportand such rules may, in particular

a. make different provisions according to which the previous financialstatement or report are replaced or are supplemented by a documentindicating the corrections to be made;

b. make provisions with respect to the functions of the company's auditor inrelation to the revised financial statement or report;

c. require the directors to take such steps as may be prescribed.

AMENDMENT 5 Rule 8 vide the Companies (Accounts) Amendment Rules, 2016 read with section 134. The Ministry of Corporate Affairs vide Notification G.S.R. 742(E) dated 27th July, 2016amended the Companies (Accounts) Rules, 2014 by enforcement of the Companies(Accounts) Amendment Rules, 2016. Amendment has been made in Rule 8 of theprincipal rules which deals with the matters to be included in Boards Report. In rule 8 of the principal rules, in sub-rule (1), for the words and the report shallcontain a separate section wherein a report on the performance and financial position ofeach of the subsidiaries, associates and joint venture companies included in theconsolidated financial statement is presented, the words and shall report on thehighlights of performance of subsidiaries, associates and joint venture companies andtheir contribution to the overall performance of the company during the period underreport shall be substituted. AMENDMENT 6 The Companies (Corporate Social Responsibility Policy) Amendments Rules, 2016 readwith section 135. The Central Government hereby further amends the Companies (Corporate SocialResponsibility Policy) Rules, 2014 through the enforcement of the Companies(CorporateSocial Responsibility Policy) Amendments Rules, 2016 vide notification G.S.R. 540(E)dated 23rd May 2016, issued by the Ministry of Corporate Affairs. In the Companies (Corporate Social Responsibility Policy) Rules, 2014 in the Principal rules, in rule 4, for sub-rule (2), the following sub-rule shall be substituted, namely: (2) The Board of a company may decide to undertake its CSR activities approved bythe CSR Committee, through- a company established under section 8 of the Act or a registered trust or a registeredsociety, established by the company, either singly or along with any other company, ora company established under section 8 of the Act or a registered trust or a registeredsociety, established by the Central Government or State Government or any entityestablished under an Act of Parliament or a State legislature : Provided that- if, the Board of a company decides to undertake its CSR activitiesthrough a company established under section 8 of the Act or a registered trust or aregistered society, other than those specified in this sub-rule, such company or trust orsociety shall have an established track record of three years in undertaking similarprograms or projects; and the company has specified the projects or programs to beundertaken, the modalities of utilisation of funds of such projects and programs and themonitoring and reporting mechanism. AMENDMENT 7 MCA Amends Part II of Section II of schedule V of Companies Act 2013 Remuneration payable by companies having no profit or inadequate profit withoutCentral Government According to Section II to part II of the Schedule V, Remuneration to managerial personpayable by companies having no profit or inadequate profit without CentralGovernment approval cannot exceed the limits under (A) and (B) given below: (A) Based on effective capital:

S.No	Where Effective Capital is	Remuneration payable Per annum shall not exceed (Rs)
1	Negative or less than 5 crores	60 lacs
2	5 crores or above but less than 100 crores	84 lacs
3	100 crores and above but less than 250 crores	120 lacs
4	250 crores and above	120 lacs plus 0.01% of the effective capital in excess of Rs.250 crores

• If a special resolution is passed by the shareholders, the above limits shall be doubled.
• It is hereby clarified that for a period less than one year, the limits shall be pro-rated.

(B) No approval is required if all the conditions are fulfilled: A managerial person who is functioning in a professional capacity

• Such managerial person is not having any interest in the capital of the company or its holding company or any of its subsidiaries directly or indirectly or through any other statutory structures.
• Such person is not having any, direct or indirect interest or related to the directors or promoters of the company or its holding company or any of its subsidiaries at any time during the last 2 years before or on or after the date of appointment.
• Such person possesses graduate level qualification with expertise and specialized knowledge in the field in which the company operates.

According to Proviso to section (b) of section II of part II of Schedule V : Any employeeof a company holding shares of the company not exceeding 0.5% of its paid up sharecapital under any scheme formulated for allotment of shares to such employeesincluding Employees Stock Option Plan or by way of qualification shall be deemed tobe a person not having any interest in the capital of the company. Provided further that the limits specified under items (A) ant (B) of this section shallapply, if-

(i) payment of remuneration is approved by a resolution passed by theBoard and, in the case of a company covered under sub-section (1) ofsection 178 also by the Nomination and Remuneration Committee

(ii) the company has not committed any default in repayment of any of itsdebts (including public deposits) or debentures or interest payablethereon for a continuous period of thirty days in the preceding financialyear before the date of appointment of such managerial person and incase of a default, the company obtains prior approval from secured creditors for the proposed remuneration and the fact of such priorapproval having been obtained is mentioned in the explanatorystatement to the notice convening the general meeting ;

(iii) an ordinary resolution or a special resolution, as the case may be, hasbeen passed for payment of remuneration as per the limits laid down initem(A) or a special resolution has been passed for payment ofremuneration as per item(B), at the general meeting of the company fora period not exceeding three years .

(iv) a statement along with a notice calling the general meeting referred to inclause (iii) is given to the shareholders containing the followinginformation namely:

I. General information:

1. Nature of industry,

2. Date or expected date of commencement of commercial production,

3. In case of new companies expected date of commencement of activitiesas per project approved by financial institutions appearing in theprospectus,

4. financial performance based on given indicators &

5. foreign investments or collaborations, if any.

II. Information about the appointee:

1. Background details,

2. Past remuneration,

3. Recognition or awards,

4. Job profile and his suitability &

5. Remuneration proposed.

6. Comparative remuneration profile with respect to industry, size of thecompany, profile of the position and person and

7. Pecuniary relationship directly or indirectly with the company orrelationship with the managerial personnel, if any are to be disclosed.

III. Other information:

Reasons of loss or inadequate profits,Steps taken or proposed to be taken for improvement,

Expected increase in productivity and profits in measurable terms

IV. Disclosures:

The disclosures shall be mentioned in the Board of Directors report under theheading Corporate Governance

(i) all elements of remuneration package such as salary, benefits,bonuses, stock options, pension, etc., of all the directors;

(ii) Details of fixed component. and performance linked incentivesalong with the performance criteria;

(iii) service contracts, notice period, severance fees; and

(iv) Stock option details, if any, and whether the same has beenissued at a discount.

AMENDMENT 8

CHAPTER XVI

PREVENTION OF OPRESSION AND MISMANAGEMENT

Sec-241 Application to Tribunal for relief in cases of oppression, etc (1) Any member of a company who complains that (a) the affairs of the company have been or are being conducted in a manner prejudicialto public interest or in a manner prejudicial or oppressive to him or any other memberor members or in a manner prejudicial to the interests of the company; or (b) the material change, not being a change brought about by, or in the interests of, anycreditors, including debenture holders or any class of shareholders of the company, hastaken place in the management or control of the company, whether by an alteration inthe Board of Directors, or manager, or in the ownership of the companys shares, or if ithas no share capital, in its membership, or in any other manner whatsoever, and that byreason of such change, it is likely that the affairs of the company will be conducted in amanner prejudicial to its interests or its members or any class of members,may apply to the Tribunal, provided such member has a right to apply under section244, for an order under this Chapter. (2) The Central Government, if it is of the opinion that the affairs of the company arebeing conducted in a manner prejudicial to public interest, it may itself apply to theTribunal for an order under this Chapter. Sec-242 Powers of Tribunal (1) If, on any application made under section 241, the Tribunal is of the opinion

(a) that the companys affairs have been or are being conducted in a manner prejudicialor oppressive to any member or members or prejudicial to public interest or in amanner prejudicial to the interests of the company; and

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

(2) Without prejudice to the generality of the powers under sub-section (1), an orderunder that sub-section may provide for

(a) the regulation of conduct of affairs of the company in future;

(b) the purchase of shares or interests of any members of the company by othermembers thereof or by the company;

(c) in the case of a purchase of its shares by the company as aforesaid, the consequentreduction of its share capital;

(d) restrictions on the transfer or allotment of the shares of the company;

(e) the termination, setting aside or modification, of any agreement, howsoever arrivedat, between the company and the managing director, any other director or manager,upon such terms and conditions as may, in the opinion of the Tribunal, be just andequitable in the circumstances of the case;

(f) the termination, setting aside or modification of any agreement between thecompany and any person other than those referred to in clause (e):

Provided that no such agreement shall be terminated, set aside or modified except afterdue notice and after obtaining the consent of the party concerned;

(g) the setting aside of any transfer, delivery of goods, payment, execution or other actrelating to property made or done by or against the company within three monthsbefore the date of the application under this section, which would, if made or done byor against an individual, be deemed in his insolvency to be a fraudulent preference;

(h) removal of the managing director, manager or any of the directors of the company;

(i) recovery of undue gains made by any managing director, manager or director duringthe period of his appointment as such and the manner of utilisation of the recoveryincluding transfer to Investor Education and Protection Fund or repayment toidentifiable victims;

(j) the manner in which the managing director or manager of the company may beappointed subsequent to an order removing the existing managing director or managerof the company made under clause(h);

(k) appointment of such number of persons as directors, who may be required by theTribunal to report to the Tribunal on such matters as the Tribunal may direct;

(l) imposition of costs as may be deemed fit by the Tribunal;

(m) any other matter for which, in the opinion of the Tribunal, it is just and equitablethat provision should be made.

(3) A certified copy of the order of the Tribunal under sub-section (1) shall be filed bythe company with the Registrar within thirty days of the order of the Tribunal. (4) The Tribunal may, on the application of any party to the proceeding, make anyinterim order which it thinks fit for regulating the conduct of the companys affairsupon such terms and conditions as appear to it to be just and equitable. (5) Where an order of the Tribunal under sub-section (1) makes any alteration in thememorandum or articles of a company, then, notwithstanding any other provision ofthis Act, the company shall not have power, except to the extent, if any, permitted in theorder, to make, without the leave of the Tribunal, any alteration whatsoever which isinconsistent with the order, either in the memorandum or in the articles. (6) Subject to the provisions of sub-section (1), the alterations made by the order in thememorandum or articles of a company shall, in all respects, have the same effect as ifthey had been duly made by the company in accordance with the provisions of this Actand the said provisions shall apply accordingly to the memorandum or articles soaltered. (7) A certified copy of every order altering, or giving leave to alter, a companysmemorandum or articles, shall within thirty days after the making thereof, be filed bythe company with the Registrar who shall register the same. (8) If a company contravenes the provisions of sub-section (5), the company shall bepunishable with fine which shall not be less than one lakh rupees but which may extendto twenty-five lakh rupees and every officer of the company who is in default shall bepunishable with imprisonment for a term which may extend to six months or with finewhich shall not be less than twenty-five thousand rupees but which may extend to onelakh rupees, or with both. Sec-243 Consequence of termination or modification of certain agreements (1) Where an order made under section 242 terminates, set aside or modifies anagreement such as is referred to in sub-section (2) of that section,

(a) such order shall not give rise to any claims whatever against the company by anyperson for damages or for compensation for loss of office or in any other respect eitherin pursuance of the agreement or otherwise;

(b) no managing director or other director or manager whose agreement is soterminated or set aside shall, for a period of five years from the date of the orderterminating or setting aside the agreement, without the leave of the Tribunal, beappointed, or act, as the managing director or other director or manager of thecompany:

Provided that the Tribunal shall not grant leave under this clause unless notice of theintention to apply for leave has been served on the Central Government and thatGovernment has been given a reasonable opportunity of being heard in the matter. (2) Any person who knowingly acts as a managing director or other director ormanager of a company in contravention of clause (b) of sub-section (1), and every otherdirector of the company who is knowingly a party to such contravention, shall bepunishable with imprisonment for a term which may extend to six months or with finewhich may extend to five lakh rupees, or with both. Sec-244 Right to apply under section 241 (1) The following members of a company shall have the right to apply under section241, namely:

(a) in the case of a company having a share capital, not less than one hundred membersof the company or not less than one-tenth of the total number of its members, whichever is less, or any member or members holding not less than one-tenth of theissued share capital of the company, subject to the condition that the applicant orapplicants has or have paid all calls and other sums due on his or their shares;

(b) in the case of a company not having a share capital, not less than one-fifth of thetotal number of its members:

Provided that the Tribunal may, on an application made to it in this behalf, waive all orany of the requirements specified in clause (a) or clause (b) so as to enable the membersto apply under section 241. Explanation.For the purposes of this sub-section, where any share or shares are heldby two or more persons jointly, they shall be counted only as one member. (2) Where any members of a company are entitled to make an application under sub-section (1), any one or more of them having obtained the consent in writing of the rest,may make the application on behalf and for the benefit of all of them. Sec-245 Class action (1) Such number of member or members, depositor or depositors or any class of them,as the case may be, as are indicated in sub-section (2) may, if they are of the opinion thatthe management or conduct of the affairs of the company are being conducted in amanner prejudicial to the interests of the company or its members or depositors, file anapplication before the Tribunal on behalf of the members or depositors for seeking all orany of the following orders, namely:

(a) to restrain the company from committing an act which is ultra vires the articles or memorandum of the company;

(b) to restrain the company from committing breach of any provision of the companysmemorandum or articles;

(c) to declare a resolution altering the memorandum or articles of the company as voidif the resolution was passed by suppression of material facts or obtained bymisstatement to the members or depositors;

(d) to restrain the company and its directors from acting on such resolution;

(e) to restrain the company from doing an act which is contrary to the provisions of thisAct or any other law for the time being in force;

(f) to restrain the company from taking action contrary to any resolution passed by themembers;

(g) to claim damages or compensation or demand any other suitable action from oragainst

(i) the company or its directors for any fraudulent, unlawful or wrongful act oromission or conduct or any likely act or omission or conduct on its or their part;

(ii) the auditor including audit firm of the company for any improper ormisleading statement of particulars made in his audit report or for anyfraudulent, unlawful or wrongful act or conduct; or

(iii) any expert or advisor or consultant or any other person for any incorrect ormisleading statement made to the company or for any fraudulent, unlawful orwrongful act or conduct or any likely act or conduct on his part;

(h) to seek any other remedy as the Tribunal may deem fit.

(2) Where the members or depositors seek any damages or compensation or demandany other suitable action from or against an audit firm, the liability shall be of the firmas well as of each partner who was involved in making any improper or misleadingstatement of particulars in the audit report or who acted in a fraudulent, unlawful orwrongful manner. (3) (i) The requisite number of members provided in sub-section (1) shall be as under:

(a) in the case of a company having a share capital, not less than one hundredmembers of the company or not less than such percentage of the total number ofits members as may be prescribed, whichever is less, or any member or membersholding not less than such percentage of the issued share capital of the companyas may be prescribed, subject to the condition that the applicant or applicants hasor have paid all calls and other sums due on his or their shares;

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

(ii) The requisite number of depositors provided in sub-section (1) shall not be less thanone hundred depositors or not less than such percentage of the total number ofdepositors as may be prescribed, whichever is less, or any depositor or depositors towhom the company owes such percentage of total deposits of the company as may beprescribed. (4) In considering an application under sub-section (1), the Tribunal shall take intoaccount, in particular

(a) whether the member or depositor is acting in good faith in making the applicationfor seeking an order;

(b) any evidence before it as to the involvement of any person other than directors orofficers of the company on any of the matters provided in clauses (a) to (f) of sub-section (1);

(c) whether the cause of action is one which the member or depositor could pursue inhis own right rather than through an order under this section;

(d) any evidence before it as to the views of the members or depositors of the companywho have no personal interest, direct or indirect, in the matter being proceeded underthis section;

(e) where the cause of action is an act or omission that is yet to occur, whether the act oromission could be, and in the circumstances would be likely to be

(i) authorised by the company before it occurs; or

(ii) ratified by the company after it occurs;

(f) where the cause of action is an act or omission that has already occurred, whether theact or omission could be, and in the circumstances would be likely to be, ratified by thecompany.

(5) If an application filed under sub-section (1) is admitted, then the Tribunal shall haveregard to the following, namely:

(a) public notice shall be served on admission of the application to all the members ordepositors of the class in such manner as may be prescribed;

(b) all similar applications prevalent in any jurisdiction should be consolidated into asingle application and the class members or depositors should be allowed to choose thelead applicant and in the event the members or depositors of the class are unable tocome to a consensus, the Tribunal shall have the power to appoint a lead applicant, whoshall be in charge of the proceedings from the applicants side;

(c) two class action applications for the same cause of action shall not be allowed;

(d) the cost or expenses connected with the application for class action shall be defrayedby the company or any other person responsible for any oppressive act.

(6) Any order passed by the Tribunal shall be binding on the company and all itsmembers, depositors and auditor including audit firm or expert or consultant oradvisor or any other person associated with the company. (7) Any company which fails to comply with an order passed by the Tribunal under thissection shall be punishable with fine which shall not be less than five lakh rupees butwhich may extend to twenty-five lakh rupees and every officer of the company who isin default shall be punishable with imprisonment for a term which may extend to threeyears and with fine which shall not be less than twenty-five thousand rupees but whichmay extend to one lakh rupees. (8) Where any application filed before the Tribunal is found to be frivolous or vexatious,it shall, for reasons to be recorded in writing, reject the application and make an orderthat the applicant shall pay to the opposite party such cost, not exceeding one lakhrupees, as may be specified in the order. (9) Nothing contained in this section shall apply to a banking company. (10) Subject to the compliance of this section, an application may be filed or any otheraction may be taken under this section by any person, group of persons or anyassociation of persons representing the persons affected by any act or omission,specified in sub-section (1). Sec-246 Application of certain provisions to proceedings under section 241 or section245 The provisions of sections 337 to 341 (both inclusive) shall apply mutatis mutandis, inrelation to an application made to the Tribunal under section 241 or section 245. To download this company law amendment file in pdf version click on the below link : Click here Compiled by CA Aseem Trivedi